On December 21, 2000, former President Clinton signed into law the LIFE Act, Title XI of H.R. 5548, enacted by reference in Public Law 106-553 (Dec. 21, 2000), and the LIFE Act Amendments, Title XV of H.R. 5666, enacted by reference in Public Law 106-554 (Dec. 21, 2000), which provide for numerous different immigration benefits. Section 1104 of the LIFE Act and its Amendments (LIFE Legalization) allow certain eligible aliens to apply for adjustment of status to that of a lawful permanent resident (LPR) under a modified version of section 245A of the Immigration and Nationality Act (Act) (8 U.S.C. 1255a). Aliens who are eligible to apply for adjustment under LIFE Legalization are those who, before October 1, 2000, had filed with the Attorney General a written claim for class membership in the CSS, LULAC, or Zambrano legalization class action lawsuits. In order to qualify for adjustment, aliens must establish that they entered the United States before January 1, 1982, and thereafter resided in continuous unlawful status through May 4, 1988. Aliens also must establish that they were continuously physically present in the United States from November 6, 1986, through May 4, 1988. Furthermore, aliens must demonstrate basic citizenship skills. Finally, aliens must be otherwise admissible to the United States under the Act. LIFE Legalization also provides for a stay of removal or deportation and work authorization for eligible aliens under this law while their adjustment applications are pending.

Section 1504 of the LIFE Act Amendments provides that the Attorney General may not remove certain spouses and children of aliens eligible to adjust under LIFE Legalization and shall grant employment authorization to those eligible spouses and children for the period of time in which they have been afforded Family Unity protection. Aliens who might benefit from the Family Unity provisions of the LIFE Act Amendments are those who:

(1) Are currently in the United States;

(2) Are the spouse or unmarried child of an alien who is eligible for adjustment under LIFE Legalization; and

(3) Entered the United States before December 1, 1988, and were residing in the United States on such date.

On June 1, 2001, the Attorney General published an interim rule in the Federal Register at 66 FR 29661. The Attorney General amended the Immigration and Naturalization Service (Service) regulations by adding Subparts B and C to 8 CFR part 245a. Subpart B implemented the LIFE Legalization provisions of the LIFE Act and Subpart C implemented the Family Unity provisions of the LIFE Act Amendments.

The interim rule invited interested persons to provide written comments on or before July 31, 2001. The Service received 132 comments during the comment period and has carefully considered all these comments in formulating this final rule. The following is a discussion of the comments and the Service's response.

Five commenters questioned the Service's imposition of a $330 filing fee for LIFE Legalization applications. Many of these commenters argued that the Service disregarded the legislative intent that LIFE Legalization applicants be treated in the same manner that they would have been treated had they filed applications for legalization during the initial application period. 1 These commenters contended that any alien who is eligible to apply for LIFE Legalization would have been required to pay only a $185 filing fee during the Immigration Reform and Control Act of 1986 (IRCA) legalization application period (the filing fee for the Form I-687, Application to Adjust Status as a Temporary Resident-Applicants, under section 245A of the INA). The Service appreciates that many commenters have concerns regarding what they perceive to be a substantial increase in filing fees for legalization benefits. The Service must note, however, that in addition to the $185 filing fee for the Form I-687, IRCA legalization applicants were required to pay an additional $120 filing fee when applying for LPR status (the filing fee for the Form I-698, Application to Adjust Status From Temporary to Permanent Resident). As such, IRCA legalization applicants paid filing fees totaling $305, just $25 less than the fee imposed by the Service on LIFE Legalization applicants in the interim rule.

That being said, the Service has reconsidered the fee that will be imposed on LIFE Legalization applicants. As was discussed in the preamble to the interim rule (66 FR 29665, 29667-68), in developing fees, the Service must comply with guidance provided in the Office of Management and Budget (OMB) Circular A-25. The Service referred to a preliminary draft of its most recent fee review—the FY 2000 Immigration Examinations Fee Account Review—when determining the fee to be levied on LIFE Legalization applicants using the Form I-485, Application to Register Permanent Residence or Adjust Status. That review conducted an in-depth analysis of both direct and indirect costs using an activity-based costing methodology. The draft of the fee review identified the full cost of the Form I-485 to be $330. Since publication of the interim rule, the Service has re-evaluated the FY 2000 Immigration Examinations Fee Account Review and calculated the full cost of the Form I-485 to be $255 instead ( see the Service's final rule published on December 21, 2001, at 66 FR 65811). Accordingly, the application fee for LIFE Legalization applicants is reduced to $255. Any individual who previously filed a LIFE Legalization application and paid the $330 filing fee will receive a refund in the amount of the difference ($75) from the Service. If an individual is due a refund, there is no reason or need for that individual to contact the Service; the refund will be generated without any action from the LIFE Legalization applicant. 2

Some commenters argued that members of the LULAC class action lawsuit were previously required to pay the original $185 filing fee and they should be credited this amount when filing for LIFE Legalization. The Service does not agree. The LIFE Act provides for certain class action applicants to apply, under a new procedure, for adjustment of status pursuant to section 245A of the Act. Any prior Form I-687 that may have been filed by these class action applicants has no bearing on any Form I-485 that may be filed pursuant to LIFE Legalization. This is a new program with new filing requirements. As such, all aliens applying for LIFE Legalization are subject to the imposition of the full $255 filing fee.

Some commenters also criticized the Service's position that none of the fees collected from the filing of LIFE Legalization applications will be used in the enforcement of IRCA's anti-discrimination provisions. As was discussed in the supplementary information of the interim rule (66 FR 29662), section 245A(c)(7) of the Act provided for the allocation of up to $3 million of the application fees for section 245A of the Act to immigration-related unfair employment practices programs. Section 1104(c)(6) of the LIFE Act specifically prohibits the use of any funds collected through this program to be used in such a manner. Consequently, the Service is statutorily prohibited from using any LIFE Legalization application fees for the enforcement of immigration-related unfair employment practices.

One commenter wanted the Service to amend the requirement that an applicant must establish he or she filed a written claim for class membership in CSS, LULAC, or Zambrano. Alternatively, this commenter argued that any applicants who had submitted a Form I-687 prior to the enactment of the LIFE Act should be considered by the Service to have already established prima facie eligibility, as well as continuous residence and physical presence requirements. In addition, the commenter argues that anyone who filed a Form I-687 prior to the enactment of the LIFE Act should not have to file a new application pursuant to the LIFE Act. The Service disagrees with these arguments. Sections 1104(b) and (c)(2) of the LIFE Act specifically require that LIFE Legalization applicants must have filed a written claim for class membership, and establish continuous unlawful residence and physical presence, basic citizenship skills, and admissibility as an immigrant. Furthermore, use of the Form I-687 has not been exclusively limited to the CSS, LULAC, and Zambrano lawsuits, and in some cases, the Form I-687 was not required to be completely filled out or signed by the applicant. Therefore, the fact that an individual may have filed a Form I-687 does not alone establish prima facie eligibility for LIFE Legalization. The Service will not amend the final regulations in response to this comment.

However, the Service has decided to establish a definition for “written claim for class membership.” During the past 14 years, the courts have provided sufficient periods of time for aliens alleging class membership to come forward and notify the Attorney General that they believe that they meet the class definitions. Various forms of evidence that would prove notice to the Attorney General are listed in 8 CFR 245a.14. The Service is adding to that list other forms of evidence which would have been issued pursuant to filing a claim for class membership. The Service is adding Form I-765, Application for Employment Authorization, submitted by an alien who filed for class membership, and an application for a stay of removal submitted by an alien who filed for class membership, and notes that the Service will also evaluate all relevant documents offered by the applicant to establish notice.

Six commenters objected to the requirement of the concurrence of Service counsel before an immigration judge or the Board of Immigration Appeals may administratively close proceedings, arguing that no guidance is provided in the regulations as to when Service counsel will withhold such concurrence. Service counsel will withhold such concurrence if the alien is not prima facie eligible for legalization. Further guidance through the final regulations is not necessary. No amendments to the final regulations will be made as a result of this comment.

These same commenters pointed out that an alien with a final order receives an automatic stay of removal by filing an application for LIFE Legalization, and as such argued that concurrence by Service counsel in order to administratively close the matter of an alien currently in proceedings is pointless because the Service could not remove such alien in any event. The Service points to the distinction between administrative proceedings to determine removability and the actual removal of an alien. Should the Service counsel find an alien in proceedings to be prima facie ineligible for LIFE Legalization benefits, such matter will not be administratively closed. If the alien were ultimately ordered removed, such order will be stayed pending the final outcome of the adjudication of that LIFE Legalization application ( see 8 CFR 245a.13(f)). The final regulations will not be amended in response to these comments.

One commenter stated that the Service regulations governing application for LIFE Legalization from abroad is not specific enough with regards to procedures such as fingerprinting, interviewing, and parole into the United States. As indicated in the interim regulations, the Service will provide the applicant who applies for LIFE Legalization from abroad with specific instructions after his or her application has been reviewed. The Service is coordinating efforts with other Federal agencies and American consulates abroad in order to accommodate applicants who file from abroad. Since there are many scenarios for an applicant from abroad ( e.g., he or she may reside in an area with an overseas Service office, or in an area with only an American consulate, or in an area remote from either, etc. ), the Service will provide each applicant with specific procedures that would best accommodate his or her situation and location. Further, any additional procedural guidelines regarding applications from abroad may be set via Service policy memos. As such, the final regulations will not be amended as a result of this comment.

Five commenters suggested that the Service clarify that a LIFE Legalization applicant may submit proof that he or she is satisfactorily pursuing a course of study to achieve basic citizenship skills at any time during the application process. The commenters stated that the Form I-485 Supplement D, LIFE Legalization Supplement to Form I-485 Instructions, advised applicants that such evidence could be submitted at the time of application, subsequent to filing the application but before the Service interview, or at the time of Service interview. The Service has considered this comment and has made appropriate adjustments to the language at 8 CFR 245a.12(d)(10) to accommodate this suggestion.

Four commenters questioned the necessity of 8 CFR 245a.12(g). These commenters contended that the section in the interim regulations that described secondary evidence and the Service's acceptance of such evidence is redundant and unnecessary. Upon further review of this section of the interim regulations, the Service finds that much of the language contained in 8 CFR 245a.12(g) is indeed unnecessary, especially when much of that language is contained in 8 CFR 103.2(b)(2). As such, the Service has adopted these commenters' suggestions and has amended the language at 8 CFR 245a.12(f) and (g).

Five commenters requested that the Service include a timeframe within which a Form I-765, Application for Employment Authorization, must be adjudicated. The Service does not believe that any regulatory language needs to be included in the final rule to address this issue. Employment authorization shall be granted to certain LIFE Legalization applicants pursuant to 8 CFR 274a.12(c)(24). The regulations at 8 CFR 274a.13(d) provide that a Form I-765 filed pursuant to 8 CFR 274a.12(c) (with certain specific exceptions) be adjudicated within 90 days of receipt. These same regulations provide for the issuance of interim employment authorization if a Form I-765 is not adjudicated within those 90 days. In other words, if a LIFE Legalization applicant applies for, and is eligible for, employment authorization, and does not receive such employment authorization within 90 days of filing, he or she may request interim employment authorization at the Service district office having jurisdiction over his or her place of residence. In light of these existing regulations, the Service will not amend the regulations at 8 CFR 245a.13(d)(2).

Four commenters expressed concern for the language at 8 CFR 245a.13(e) relating to the issuance of advance parole. Specifically, these commenters were troubled that the interim rule at 8 CFR 245a.13(e) indicated that the Service shall issue advance parole “pursuant to the standards prescribed in section 212(d)(5) of the Act.” Section 212(d)(5) of the Act states, in pertinent part, that the “Attorney General may * * * parole [aliens] into the United States temporarily under such conditions as he may prescribe only on a case-by-case basis for urgent humanitarian reasons or significant public benefit.” A review of this reference, especially in light of the language at 8 CFR 245a.13(e)(1) (which indicates that the Service shall approve applications for advance parole filed by any alien eligible for LIFE Legalization), does appear to be too stringent. Accordingly, the Service has amended the regulations in response to these commenters' concerns.

One commenter questioned the Service's requirement that all requests for advance parole be submitted to the lockbox address in Chicago and adjudicated at the Missouri Service Center. The commenter indicated that this filing requirement could pose a problem for those LIFE Legalization applicants who have to travel abroad due to emergent circumstances. The Service appreciates this commenter's concern. Therefore, if a LIFE Legalization applicant must travel abroad due to reasons described in section 212(d)(5) of the Act, he or she will be allowed to file the Form I-131, Application for Travel Document, with the District Director having jurisdiction over his or her place of residence. Such an alien must demonstrate to the District Director that he or she is an eligible alien who has filed for adjustment of status pursuant to LIFE Legalization and that he or she must travel abroad due to urgent humanitarian reasons. All other Forms I-131 filed by LIFE Legalization applicants must be filed with the Director of the Missouri Service Center. The regulations have been amended accordingly.

Four commenters argued that the interim rule placed an unauthorized evidentiary burden of proof on LIFE Legalization applicants who travel abroad without advance parole. Nothing in the interim rule affects the Service's adjudication of a LIFE Legalization application due to an applicant's travel abroad while the LIFE Legalization application is pending. Section 1104(c)(3)(B) of the LIFE Act states that “the Attorney General shall, in accordance with regulations, permit the alien to return to the United States after such brief and casual trips abroad as reflect an intention on the part of the alien to adjust to lawful permanent resident status and after brief temporary trips abroad occasioned by a family obligation involving an occurrence such as the illness of a close relative or other family need.” As the Act directed the Attorney General to issue regulations on the topic, 8 CFR 245a.13(e) was issued. Pursuant to 8 CFR 245a.13(e), an alien who travels abroad will be afforded the opportunity to establish the requirements of section 1104(c)(3)(B) of the LIFE Act to the Service or to an immigration judge.

In addition, the regulation at 8 CFR 245a.13(e)(1) permits each LIFE Legalization applicant to apply for advance parole. Through 8 CFR 245a.13(e)(2) and (3), applicants are encouraged to do so, in two different ways. Under 8 CFR 245a.13(e)(2), an alien who goes abroad and returns under a grant of advance parole is presumed to be entitled to return under section 1104(c)(3)(B) of the LIFE Act unless the Service, having placed the alien in an expedited removal or section 240 of the Act proceeding, proves by a preponderance of the evidence that the alien is not eligible for adjustment pursuant to LIFE Legalization. If the alien goes abroad without obtaining advance parole, however, 8 CFR 245a.13(e)(3) provides that the alien must be denied admission and may be removed, unless the alien establishes “clearly and beyond doubt” that he or she filed a timely LIFE Legalization application showing prima facie eligibility, and the alien's absence meets the requirements of section 1104(c)(3)(B) of the LIFE Act.

These commenters object to the “clearly and beyond doubt” standard of proof for 8 CFR 245a.13(e)(3), believing that this standard is impermissibly burdensome on aliens. Section 235(b)(2) of the Act clearly states that the Service must deny admission to an applicant for admission, unless the alien is “clearly and beyond doubt” entitled to admission. The same standard of proof applies in section 240 of the Act proceedings against an applicant for admission (section 240(c)(2)(A) of the Act). Moreover, the Service, under 8 CFR 245a.13(e)(1), must grant advance parole to any advance parole applicant who makes a prima facie showing of LIFE Legalization eligibility.

Some commenters stated that the Service should not require LIFE Legalization applicants to submit evidence that they applied for class membership. These commenters contended that the Service should have all of the necessary evidence in its databases and administrative files, and that requiring LIFE Legalization applicants to file this evidence is an unfair burden. The Service does believe that aliens who filed a written claim for class membership in CSS, LULAC, or Zambrano prior to October 1, 2000, will appear in the Service's databases as so registered. If for some reason, however, an applicant who did timely file for class membership does not appear in Service databases, then any documentary evidence of such filing provided by the applicant will be reviewed by the Service. If this documentary evidence is provided with the application, the Service will not need to request such evidence from the applicant, thereby expediting the application process. If the applicant does not have this documentary evidence in his or her possession, but believes that the Service has this evidence in the applicant's administrative file, the interim regulations at 8 CFR 245a.12(g) provide that applicants could submit a statement to that effect in lieu of the actual documentation. This language has been moved to 8 CFR 245a.12(f) in the final regulations. The Service is not amending the language in the final rule in response to these comments.

Two commenters requested that the Service accept affidavits, letters, and documents from community agencies as evidence of class membership application. It is noted that the interim regulations at 8 CFR 245a.14(e) (8 CFR 245a.14(g) in the final regulations) permit LIFE Legalization applicants to submit “[a]ny other relevant document(s)” in proving class membership application along with those listed under 8 CFR 245a.14(a) through (d) (8 CFR 245a.14(a) through (f) in the final regulations). This regulatory language does not limit the type of documentation that may be submitted to prove class member application. The Service believes the inclusion of this phrase (other relevant documents) creates a practical, as well as an expansive, definition that encompasses all types of evidence, including those discussed by the commenters. As the Service's interim rule does allow for the submission of the above-mentioned documents, the Service will not amend the regulations in response to these comments.

In addition, the Service clarifies that, where an alien filed a written claim for class membership, he or she is deemed to have also filed a claim for class membership on behalf of a spouse or child who was a spouse or child as of the date the alien (who filed a written claim for class membership) alleges that he or she attempted to file or was discouraged from filing an application for legalization during the original application period. Thus, the definition of “eligible alien” is amended to include a spouse or child who was a spouse or child as of the date the alien (who filed a written claim for class membership) alleges that he or she attempted to file or was discouraged from filing an application for legalization during the original application period. This in no way implies that such spouses and children will derive adjustment of status based on the LIFE Legalization application of the alien who filed a written claim for class membership. Rather, the spouse or child of the alien who filed the claim for class membership will also be considered to be an “eligible alien” who may file a separate application for LIFE Legalization that will be adjudicated based on the merits of such alien's documentation.

Many commenters expressed concern over the Service's requirement that LIFE Legalization applicants produce evidence of their continuous residence in an unlawful manner prior to January 1, 1982, through May 4, 1988. Several commenters cited the great length of time that has passed since 1982, while others cited LIFE Legalization applicants' unlawful status and fear of discovery, as possible reasons for not having evidence of their residence during this time period. The Service recognizes that LIFE Legalization applicants will be required to produce documents dated nearly 20 years ago. Because section 1104(c)(2)(B) of the LIFE Act imposes this continuous residence requirement, however, the Service will continue to require LIFE Legalization applicants to document their residence in the United States during the requisite time period.

One commenter suggested that an alien's departure between January 1, 1982, and May 4, 1988, under an order of deportation should not interrupt the alien's continuous residence. The statute clearly provides that departure while a deportation order is in effect ends “continuous residence”; section 245A(g)(2)(B)(i) of the Act states that “an alien shall not be considered to have resided continuously in the United States if, during any period for which continuous residence is required, the alien was outside the United States as a result of a departure under an order of deportation.” No provision of the LIFE Act revoked this section of the Act. As such, the Service will not amend the final regulations in response to this comment.

One commenter requested clarification of the language at 8 CFR 245a.15(d). This commenter questioned the use of the word “eligible” in the following sentence: “The following categories of aliens, who are otherwise eligible to adjust to LPR status pursuant to LIFE Legalization, may file for adjustment of status provided they resided continuously in the United States in an unlawful status since prior to January 1, 1982, through May 4, 1988.” The Service has reviewed this sentence and is confident of its wording. The paragraphs following the sentence quoted above list those categories of nonimmigrants who might be able to establish unlawful residence in the United States. If an alien falls into one of these categories of nonimmigrants, and meets the other eligibility requirements of LIFE Legalization ( i.e., he or she applied for class membership in one of the three class action lawsuits prior to October 1, 2000, he or she is admissible as an immigrant, he or she has not been convicted of a felony or of three or more misdemeanors, etc. ), then he or she may file for adjustment of status pursuant to LIFE Legalization. The Service will not amend the final regulations in response to this comment.

Six commenters argued that the standards set out in 8 CFR 245a.16(b) regarding brief, casual, and innocent absences in relation to the continuous physical presence requirement did not allow for case-by-case adjudication. It was never the intent in the interim rule to set out a categorical definition of brief, casual, and innocent absences. The numerical standards were placed in the interim rule to serve as a guide to adjudicators. If the number of days the applicant was absent from the United States fell below the guidelines, the adjudicator need look no further. If the applicant's trip was greater than 30 days or an aggregate of 90 days, the applicant could provide reasons for why his or her return could not be accomplished within the time period(s) allowed. As such, a case-by-case adjudication is necessitated by the interim rule. Given the misinterpretation by these commenters, however, the Service will amend 8 CFR 245a.16(b) to remove the standards. Applicants should now be prepared to offer evidence establishing that absences of any period of time were brief, casual, and innocent.

One commenter stated that the regulations at 8 CFR 245a.16(a) would prevent the submission of Social Security Administration (SSA) or Internal Revenue Service (IRS) printouts as evidence of continuous physical presence. The regulations read, in pertinent part, that evidence “may consist of any documentation issued by any governmental or nongovernmental authority, provided such evidence bears the name of the applicant, was dated at the time it was issued, and bears the signature, seal, or other authenticating instrument of the authorized representative of the issuing authority.” The Service does not believe this language would prevent the submission of SSA or IRS printouts, provided these printouts bear the name of the applicant, are dated at the time they are issued ( i.e., when they are printed out by the issuing agency), and are appropriately endorsed by the issuing agency. The Service will not amend the regulations in response to these comments.

Many commenters were concerned about individuals who have contracted a communicable disease of public health significance. LIFE Legalization applicants, like all other applicants for admission to the United States, must be able to establish their admissibility pursuant to section 212(a) of the Act. If a LIFE Legalization applicant is found inadmissible based on any of the health-related grounds described at section 212(a)(1) of the Act, he or she may file for a waiver of these grounds of inadmissibility. The interim rule does not prohibit this. Consequently, the Service will not amend the regulations based on these comments.

Six commenters stated that the interim rule did not take into account the fact that many LIFE Legalization applicants have not been entitled to employment authorization and therefore may not be able to demonstrate consistent employment history. In this context, the application of the phrase “history of employment” is statutory and is found in the Special Rule for Determination of Public Charge at section 245A(d)(2)(B)(iii) of the Act. The statutory Special Rule is found in IRCA and is incorporated by reference in the LIFE Act. The Service believes that the statutory Special Rule is meant to assist a legalization applicant to prevent a finding of being inadmissible on public charge grounds.

One commenter argues that IRCA and the LIFE Act require that an applicant demonstrate that he or she is not likely to become a public charge; that the LIFE Act interim rule provides that an alien with a consistent employment history is not inadmissible; and that, if the adjudication took place during the original application period (May 5, 1987, to May 4, 1988), the determination of whether a given class member was likely to become a public charge would have taken place when there “was no legal bar to class members working in the United States, see 8 U.S.C. 1324a.” This commenter fails to note that the “employment history” is derived from the statutory Special Rule, and that employer sanctions provisions were enacted in IRCA on November 6, 1986. Again, both IRCA and the LIFE Act require that an alien prove that he or she is not likely to become a public charge, clearly a prospective analysis. Both statutes contain the same “Special Rule” to be applied in the public charge analysis and both use the standard of demonstrating “employment history” to overcome a finding that one is likely to become a public charge.

Nevertheless, the Service has decided to amend 8 CFR 245a.18. The Service is adding language to the regulations regarding the adjudication of public charge for a LIFE Legalization applicant. In adjudicating the issue of public charge, the Service will automatically apply the Special Rule. Adjudicating whether one is likely to become a public charge is necessarily a prospective analysis. The Special Rule provides for a retrospective analysis in determining the prospect of becoming a public charge. Accordingly, the Service will take into account an alien's employment history in the United States, to include the period prior to the 1986 advent of employer sanctions. Additional language in the regulation will encourage applicants to submit as much information as possible in order to preclude a public charge finding. The analysis will be on a case-by-case basis and will permit the applicant to prove financial responsibility pursuant to any number of ways, to include pointing to the ability to have a sponsor file a Form I-134, Affidavit of Support, on the applicant's behalf. Anyone can be the sponsor for the Form I-134.

Four commenters stated that the interim rule regarding the interviewing of LIFE Legalization applicants implied that they would not be interviewed by an immigration officer in their jurisdiction. The Service did not intend to convey this message through the interim rule. The interim rule at 8 CFR 245a.19(a) stated that “[a]pplicants will be interviewed by an immigration officer as determined by the Director of the Missouri Service Center.” All LIFE Legalization applicants who applied for adjustment of status from within the United States, and who must appear for a Service interview, will be interviewed by a Service officer at the Service office with jurisdiction over their place of residence. Those LIFE Legalization applicants who applied for adjustment of status from abroad, and who must appear for a Service interview, will be interviewed by a Service officer as determined by the Director of the Missouri Service Center. The Service does not, therefore, believe that the final regulations must be amended in response to these comments.

One commenter requested that the Service not require interviews of LIFE Legalization applicants. This commenter argued that many LIFE Legalization applicants had already been interviewed when they applied for class membership in one of the three class action lawsuits. While some applicants may not be required to establish basic citizenship skills because they meet one of the listed exceptions, or they have met the requirements in some other fashion (obtained a GED or are enrolled in an acceptable learning program), there will be many LIFE Legalization applicants who will be required to pass a basic citizenship test at the time of his or her Service interview. Further, in-person interviews are useful to both the Service officer and the applicant. It provides an opportunity for any inconsistencies or gaps in the application to be resolved in a timely manner without having to resort to correspondence through the mail. Moreover, there will be instances where an in-person interview will be necessary because shortcomings or discrepancies in an applicant's file cannot be resolved through correspondence ( e.g., an applicant does not have sufficient documentation to establish continuous physical presence, but is able to convince a Service officer at an in-person interview that he or she was physically present in the United States). Accordingly, the regulations will not be amended.

Four commenters requested that the Service's final rule provide for the issuance of a notice of intent to deny prior to the denial of any LIFE Legalization application. The interim rule at 8 CFR 245a.20(a)(2) does provide for the notification of a LIFE Legalization applicant if the Service intends to deny his or her application based upon information of which the applicant was not aware. The Service does recognize that applicants who filed for legalization under IRCA did receive a “Notice of Intent to Deny” prior to the issuance of a denial that clearly notified the applicant of the Service's intent to deny his or her application. While the Service has been and will be following this same procedure for LIFE Legalization applicants, it recognizes that this intention is not clearly delineated in the regulations as presently drafted. As such, the Service has made an amendment to the language at 8 CFR 245a.20(a)(2) in response to these commenters' concerns.

These same commenters also requested that the Service expressly state that all LIFE Legalization applicants whose applications are denied may appeal their decisions to the Administrative Appeals Office. The interim rule at 8 CFR 245a.20(a)(2) clearly states that “a party affected under this part by an adverse decision is entitled to file an appeal . . . to the Administrative Appeals Unit.” The Service believes that the interim rule is quite clear that all decisions of denial issued pursuant to LIFE Legalization may be appealed. As such, the Service makes no changes pursuant to these comments.

Many commenters stated that they had already submitted all required evidence in support of their claims to eligibility for legalization. Commenters also expressed concern over what could be a lengthy processing time for any Freedom of Information Act (FOIA) requests to obtain these documents, and then presumably submit them in support of their LIFE Legalization applications. The Service acknowledges that there is a designated time period in which to apply for LIFE Legalization and, therefore, all FOIA requests for records of LIFE Legalization applicants will be expeditiously handled. The Service wishes to reiterate that the interim rule at 8 CFR 245a.12(g) advised applicants that, in lieu of the actual documentation, they could submit a statement indicating that supporting documentation is already contained in the Service's records. This language will be moved to 8 CFR 245a.12(f) in the final rule. Also, the Service will be reviewing all previously created administrative files associated with LIFE Legalization applicants.

The interim rule at 8 CFR 245a.12(d)(2) instructed LIFE Legalization applicants to submit a $25 fingerprinting fee if they are between the ages of 14 and 75. Currently, all other applicants for adjustment of status must be fingerprinted if they are between the ages of 14 and 79, inclusive. Upon further consideration, the Service will require all LIFE Legalization applicants between the ages of 14 and 79 to be fingerprinted. This change will bring the fingerprinting requirements for LIFE Legalization applicants into alignment with the fingerprinting requirements for all other applicants for adjustment of status. LIFE Legalization applicants should be aware that the December 21, 2001, final rule at 66 FR 65811 raised the fingerprint fee from $25 to $50. LIFE Legalization applicants are subject to this higher fee.

The interim rule at 8 CFR 245a.17(c) provided exceptions for certain LIFE Legalization applicants to the establishment of basic citizenship skills. This final rule will clarify that the age exception (being 65 years of age or older) must be met at the time the application for adjustment of status is filed. Section 1104(c)(2)(E)(i)(I) of the LIFE Act requires that LIFE Legalization applicants meet the requirements of section 312(a) of the Act. Sections 312(b) and (c) of the Act provide for exceptions to the naturalization citizenship skills if certain criteria are met as of the date of filing. The implementing regulations at 8 CFR 312.1(b) and 312.2(b) also indicate that a person must meet the age requirement in order to meet these exceptions as of the date of filing. Accordingly, the Service will require that any exceptions to the basic citizenship skills requirements based on age must be met at the time of filing.

Section 1104(c)(2)(D)(i) of the LIFE Act provides that an alien must establish that he or she is admissible to the United States as an immigrant except as otherwise provided under section 245A(d)(2) of the Act. Section 245A(d)(2) of the Act references waivers of grounds of exclusion. In particular, section 245A(d)(2)(B)(ii)(II) of the Act references in what capacity section 212(a)(2)(C) of the Act may not be waived. The Service sees a conflict between section 245A(d)(2)(B)(ii)(II) of the Act and section 212(a)(2)(C) of the Act. When originally enacted, IRCA contained a similar admissibility provision at section 245A(d)(2) of the Act barring the waiver of certain grounds in the then-existing section 212 of the Act. However, section 245A(d)(2) of the Act was amended by section 603(a)(13)(D) of the Immigration Act of 1990 (IMMACT 90) (Public Law 101-649) to comport with the related changes to section 212 of the Act. Specifically, section 245A(d)(2)(B)(ii)(II) of the Act was amended by IMMACT 90 to remove the reference to pre-IMMACT 90 section 212(a)(23) of the Act (relating to a controlled substance and trafficking in controlled substance), insert a reference to section 212(a)(2)(C) of the Act, but retain the exception (so much of such paragraph as relates to a single offense of simple possession of 30 grams or less of marijuana). What would correlate to the pre-IMMACT 90 section 212(a)(23)(A) of the Act is now listed at section 212(a)(2)(A)(ii) of the Act and would thus be referenced at section 245A(d)(2)(B)(ii)(I) of the Act. By its express terms, the exception pertains to “simple possession” and as such the Service makes the interpretation that the exception must be applied to the grounds listed at section 212(a)(2)(A)(ii) of the Act and amends the regulations accordingly.

The application period is established by section 1104(c)(2)(A) of the LIFE Act as “the 12-month period beginning on the date on which the Attorney General issues final regulations to implement this section.” Given the number of clarifications provided in this final rule and in keeping with congressional intent to permit eligible aliens an opportunity to apply and to end the litigation, the Service has decided to end the application period 1 year from publication of this final rule in the Federal Register . As such, the application period commenced with the publication of the interim rule, June 1, 2001, and will end on June 4, 2003.

In enacting the provisions for LIFE Legalization, Congress sought to bring an end to the litigation and to permit eligible class members to apply for legalization under section 245A of the Act. Senators Kennedy and Abraham stated that “the LIFE Act * * * directs the Immigration and Naturalization Service (INS) to adjudicate the applications of individuals in * * * lawsuits on the merits, rather than continuing to litigate whether they were timely filed.” 146 Cong. Rec. S11, 850-02, Exhibit 2 (daily ed. Dec. 15, 2000) (Joint Memorandum Concerning the Legal Immigration Family Equity Act of 2000 and The LIFE Act Amendments of 2000). Moreover, the Government has represented to Federal courts its willingness to accept applications of any alien who alleges he or she was “front-desked.” 3 The Service had set up a Front-Desking Legalization Questionnaire Program so as to permit any alien who established that he or she was “front-desked” to apply for legalization. Prior to the expiration of the Front-Desking Legalization Questionnaire Program, Congress enacted the LIFE Act establishing a new application period for the three identified class actions ( CSS, LULAC, and Zambrano ). In Reno v. Catholic Social Services, 509 U.S. 43, 67 n.28 (1993), the Supreme Court left open the possibility that an alien who was not “front-desked” could show that the “front-desking policy” was a “substantial cause” of their failure to apply. In the LIFE Act, Congress provides benefits for, and identifies to the Attorney General, three lawsuits that include claims not only of aliens who allege that they were “front-desked” but also of aliens who claim that they were discouraged.

The difference in requirements between IRCA and LIFE 245A provisions regarding the continuous unlawful residence requirement could produce results inconsistent with the above goal. In the abstract, a class member may not be able to meet the LIFE Act requirement but may be able to meet the IRCA requirement. Under IRCA, applicants must establish that they resided continuously in the United States in an unlawful status from before January 1, 1982, to the date they applied for legalization (section 245A(a)(2)(A)). The Supreme Court indicated that class members “applied” for legalization at the time they were “front-desked.” See Reno, Id. Under the LIFE Act, however, aliens must establish that they resided continuously in the United States in an unlawful status before January 1, 1982, to May 4, 1988 (section 1104(c)(2)(B) of the LIFE Act).

Similarly, the continuous physical presence requirement is different in the two statutes. Specifically, IRCA required applicants to prove continuous physical presence in the United States since November 6, 1986 (section 245A(a)(3)(A) of the Act). Service regulations allowed that the applicant's obligation to prove continuous physical presence from November 6, 1986, ran only to the date of application (8 CFR 245a.2(b)(1)). The LIFE Act, however, requires all applicants to prove continuous physical presence from November 6, 1986, to May 4, 1988. Thus, the LIFE Act's legalization provisions do not aid class members who allege they interrupted their continuous physical presence after being “front-desked” or discouraged.

The Joint Memorandum states that “nothing in this legislation is intended to preclude this option, or to preclude the Attorney General from resolving any other IRCA adjustment applications on the merits.” Thus, to facilitate congressional intent, and in accordance with the Supreme Court decision and the Government's commitment, the Service has decided to add to the final rule a provision whereby the Service will adjudicate a LIFE Act application as an application under the standards of section 245A of the Act (that is, under the pre-LIFE Act standards) if the applicant is eligible for such relief under section 245A of the Act but not under section 1104 of the LIFE Act.

For example, if an alien fails to meet the continuous unlawful residence requirement pursuant to section 1104(c)(2)(B) of the LIFE Act, the Service will apply the continuous unlawful residence requirement using section 245A(a)(2)(A) of the Act and deem the “date the application is filed” to be the date the applicant establishes that he or she was “front-desked” or discouraged from filing. If the alien then meets the continuous unlawful resident requirement at section 245A(a)(2)(A) of the Act, and all other legalization requirements under section 245A of the Act, such an alien shall be granted temporary resident status pursuant to IRCA. Such an alien would then be required to follow all requirements set forth in 8 CFR 245a, Subpart A, such as filing a Form I-698, Application to Adjust Status from Temporary to Permanent Resident, in order to adjust his or her resident status from temporary to permanent.

The majority of commenters requested that the Service reconsider its position on children of LIFE Legalization applicants who reach the age of 21. As was discussed in the interim rule, section 1504(b) of the LIFE Act Amendments describes an eligible child as an alien who “is” the unmarried child of an alien described in section 1104(b) of the LIFE Act. The statutory language of the Family Unity provisions of the LIFE Act Amendments do not permit Family Unity protection to be extended to aliens who were children on December 21, 2000, but who “age-out” of the Act's definition of child by virtue of reaching their 21st birthday before their Family Unity applications are adjudicated. Given the need to implement an interpretation of the statute that is consistent as it applies to both spouses and children, and in view of the interpretation of other provisions of the immigration laws relating to a child who “ages-out” upon reaching the age of 21, the Service interprets section 1504(b) of the LIFE Act Amendments to require the requisite familial status (the spousal or parent-child relationship) both at the time when the application for Family Unity benefits is adjudicated and thereafter. If the familial status does not exist at the time of adjudication, the alien will not be eligible for Family Unity benefits. If the status as a spouse or child exists at the time of adjudication, but ceases to exist thereafter, the alien will no longer be eligible for Family Unity benefits. Similarly, an alien who ceases to be an unmarried child because of the alien's marriage is no longer eligible. Given the statutory constraints imposed by the LIFE Act Amendments, the Service is unable to adopt these commenters' suggestion to “freeze” the age of a child as of the date of enactment of the LIFE Act Amendments (December 21, 2000).

One commenter argued that it would be proper for the Service to continue to grant LIFE Act Amendments Family Unity protection to unmarried adult sons and daughters of LIFE Legalization beneficiaries while denying similar protection to divorced spouses and married children of such beneficiaries. The commenter reasoned that, unlike divorced spouses and married children who have no means of receiving an immigrant visa or adjusting to LPR status through an alien who has adjusted to LPR status pursuant to LIFE Legalization, the unmarried son or daughter of such a LPR may be granted immigrant status based on that relationship. The Service appreciates this comparison; however, section 1504(b) of the LIFE Act Amendments specifically limits protection to “an alien who is the spouse or unmarried child of an alien described in section 1104(b) of the [LIFE] Act.” Had Congress intended to shield unmarried sons and daughters from aging out of LIFE Act Amendments Family Unity protection, it could have drafted section 1504 more in line with section 301 of the Immigration Act of 1990 (IMMACT 90), the provision that authorized the pre-existing Family Unity Program (FUP). Section 301 establishes a link between eligibility for immigrant status and continued eligibility for Family Unity protection by providing that the requisite family relationship had to have been established by a specific date and that the alien otherwise be a “qualified immigrant”, which the Service has interpreted to mean continuously eligible for immigrant status based upon his or her relationship to a legalized alien. See, 8 CFR 236.12(a)(2). In the absence of similar language, the Service must treat LIFE Act Amendments Family Unity applicants consistently within the existing statutory definitions of child and spouse and therefore cannot adopt this commenter's suggestion.

Other commenters requested that the Service allow for Family Unity benefits to continue to be granted to spouses of LIFE Legalization applicants even if the marriage ends in divorce. Again, section 1504(b) of the LIFE Act Amendments specifically states that an eligible spouse or child “is the spouse or unmarried child of an alien described in section 1104(b) of the [LIFE] Act.” The Service is, therefore, unable to grant Family Unity benefits to former spouses of LIFE Legalization applicants.

Some commenters argued that once the principal alien has adjusted to LPR status under section 1104 of the LIFE Act, his or her family members may qualify for the same benefits as those aliens who benefit from the FUP established by section 301 of IMMACT 90. Section 301 of IMMACT 90 provides Family Unity benefits to the spouses and children of legalized aliens. Section 301(b)(2)(B) of IMMACT 90 defined legalized aliens as aliens who adjusted to temporary or permanent resident status pursuant to section 245A of the Act. The FUP applicants were required to establish entry into the United States before May 5, 1988, residence on that date, continuous residence in the United States since that date, and that a qualifying relationship with the legalized alien existed as of May 5, 1988 (8 CFR 236.12). Thus, the old FUP focused on unifying families that were in existence as of May 5, 1988. Beneficiaries of FUP protection do not automatically “age-out” upon turning 21, assuming that they are still eligible for family sponsored immigration status based upon his or her relationship to the legalized alien. These commenters argued that LIFE Legalization applicants may ultimately adjust to LPR status pursuant to section 245A of the Act, and, accordingly, their family members should be entitled to the benefits of the FUP under section 301 of IMMACT 90.

Section 301 of IMMACT 90 provides Family Unity benefits to the relatives of aliens who adjust status under the terms of section 245A of the Act as established by IRCA. Section 1504 of the LIFE Act Amendments provides Family Unity benefits to the relatives of aliens who adjust status under the terms of section 245A of the Act as modified by section 1104 of the LIFE Act. Section 1504(b) of the LIFE Act Amendments defines those relatives eligible for Family Unity benefits as the “spouse or unmarried child of an alien described in section 1104(b) of the [LIFE] Act.” Section 1504(c) of the LIFE Act Amendments provides for the parole of eligible relatives into the United States if the principal alien “has obtained lawful permanent resident status under section 1104 of the [LIFE] Act.” It is clear that Congress established a family unity program for the relatives of the LIFE Legalization beneficiaries that is separate and apart from the FUP established for the relatives of IRCA Legalization beneficiaries.

However, it must be noted that, given the decision to permit the conversion of a LIFE Legalization application to an application for IRCA legalization where such standards are more favorable to the applicant, it follows that if the principal alien's LIFE Legalization application is treated as an application under IRCA, then his or her family members, if eligible, may apply for Family Unity benefits under section 301 of IMMACT 90.

Four commenters noted that the interim rule failed to implement section 1504(c) of the LIFE Act Amendments allowing for the application for Family Unity benefits from outside the United States. The Service is drafting a proposed rule on the LIFE Act Amendments Family Unity provisions that will cover these areas of concern and, accordingly, they will not be addressed in this rulemaking.

One commenter requested that the Service allow for the appeal of denials of applications for Family Unity benefits. This commenter stated that allowing applicants to reapply for Family Unity benefits subsequent to a denial for Family Unity benefits is not sufficient and that there must be an allowance for higher-level review of denied applications. First, there is no statutory instruction to create such a procedure within the Family Unity provisions of the LIFE Act Amendments. Second, 8 CFR 245a.33(c) provides an automatic 90-day delay between the denial of an alien's Form I-817 and the referral of the decision for enforcement action. This delay is designed to create an opportunity for renewed consideration of the alien's claim to benefits under a process that will likely prove faster than the appeal procedure would have been. The Service has, therefore, concluded that the benefits of the more streamlined re-application process outweigh those of the proposed administrative appeal procedure and has not adopted this suggestion.

This same commenter further requested that the Service provide Family Unity applicants the same confidentiality provisions afforded applicants for LIFE Legalization. This commenter expressed concern that applicants seeking Family Unity benefits may subject themselves to removal proceedings should their Forms I-817 be denied. Again, while section 1104 of the LIFE Act does provide specific confidentiality provisions with regards to legalization applicants, section 1504 of the LIFE Act Amendments provides no such confidentiality provisions. Consequently, no amendments to the final rule will be made as a result of this comment.

One commenter requested that the Service clarify the length of time Family Unity benefits will be granted to eligible family members. This commenter stated that while it appeared Family Unity benefits would be granted in increments of 1 year, this was not explicit in the interim rule. This commenter also stated that Family Unity benefits should be granted in increments of 2 years, to mirror the existing FUP (whose beneficiaries receive 2-year periods of protection). Applicants for LIFE Legalization receive employment authorization valid for 1-year periods. The Service believes that any family members who derive Family Unity benefits based on the principal alien's application for LIFE Legalization should not receive employment authorization for longer periods than the principal alien. Therefore, the interim rule provided that any Family Unity beneficiary who received Family Unity benefits based on the principal alien's pending application for LIFE Legalization would receive Family Unity benefits only in increments of 1 year. Upon further consideration, however, the Service has decided to grant Family Unity benefits in increments of 2 years once the principal alien has adjusted to LPR status. The final rule is amended accordingly.

The Service has also reconsidered the duration of Family Unity benefits that will be granted to the children of LIFE Legalization applicants. If an alien is 20 years or older and applies for initial, or an extension of, Family Unity benefits based on his or her parent's pending application for LIFE Legalization, he or she will be granted Family Unity benefits that will end on the day before the alien turns 21 years of age. If an alien is 19 years or older and applies for initial, or an extension of, Family Unity benefits pursuant to the LIFE Act Amendments based on his or her parent's adjustment to LPR status pursuant to LIFE Legalization, he or she will be granted Family Unity benefits that will end on the day before the alien turns 21 years of age. This will prevent a situation where the Service will be required to terminate Family Unity benefits when the child ages-out. This has been codified in the final rule.

Although this rule constitutes a “major rule” as that term is defined in 5 U.S.C. 804(2)(A), the Department finds that under 5 U.S.C. 808(2) good cause exists for implementation of this rule on June 4, 2002. The reason for immediate implementation is as follows: The provisions of Public Law 106-553 require that the Service provide a one-year application period for LIFE Legalization applicants. The regulations implemented by the interim rule published on June 1, 2001, provided that the one-year application period would expire on May 31, 2002. Making this rule effective immediately upon publication in the Federal Register is necessary to ensure that the new one-year application period will begin before the one year application period under the interim rule ends. Allowing a gap between the two application periods would create confusion and thus be contrary to the public interest.

For the reasons just stated with respect to the Congressional Review Act, the Department also finds that this regulation falls within the “good cause” exception found at 5 U.S.C. 553(d)(3). Delaying implementation of this final rule would be contrary to the public interest.

The Attorney General, in accordance with the Regulatory Flexibility Act (5 U.S.C. 605(b)), has reviewed this regulation and, by approving it, certifies that this rule will not have a significant economic impact on a substantial number of small entities because of the following factors. This rule applies to individuals, not small entities, and allows certain class action participants who entered before January 1, 1982, to apply for adjustment of status. It therefore has no effect on small entities as that term is defined in 5 U.S.C. 601(6).

This rule will not result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year, and it will not significantly or uniquely effect small governments. Therefore, no actions were deemed necessary under the provisions of the Unfunded Mandates Reform Act of 1995.

This rule is a major rule as defined by section 251 of the Small Business Regulatory Enforcement Act of 1996 (5 U.S.C. 804). This rule will result in an effect on the economy of:

This increase is directly associated with the expected increase in the number of applications as a result of Public Laws 106-553 and 106-554, and the increase in fee that is provided for in section 245A(c)(7) of the Act (8 U.S.C. 1255a(c)(7)). The Service estimates that in fiscal year 2001, a total of 263,000 applications have been submitted because of the LIFE Act Legalization and Family Unity provisions as follows:

The Service projects that in fiscal year 2002, a total of 894,000 applications will be submitted as follows:

The Service projects that in fiscal year 2003, a total of 328,000 applications will be submitted as follows:

This rule is considered by the Department of Justice to be a “significant regulatory action” under Executive Order 12866, section 3(f), Regulatory Planning and Review. Accordingly, this rule has been submitted to the Office of Management and Budget for review.

This rule will not have substantial direct effects on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, in accordance with section 6 of Executive Order 13132, it is determined that this rule does not have sufficient federalism implications to warrant the preparation of a federalism summary impact statement.

This rule meets the applicable standards set forth in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform.

The Attorney General has reviewed this rule and has determined that it may affect family well-being as that term is defined in section 654 of the Treasury General Appropriations Act, 1999, Public Law 105-277, 112 Stat. 2681, Div. A. Accordingly, the Attorney General has assessed this action in accordance with the criteria specified by section 654 (c)(1). In this rule, the Family Unity provisions of the LIFE Act Amendments positively affect the stability of the family by providing a means for the family unit to remain intact.

The information collection requirement contained in this rule, Form I-485 Supplement D, is being revised. This form will be submitted to the Office of Management and Budget for review and approval in accordance with the Paperwork Reduction Act.

As part of its 1999 legislative recommendations to Congress, the Commission sought guidance “ * * * on whether candidate committees may accept contributions which are derived from advances from a financial institution, such as advances on a candidate's brokerage accounts, credit card, or home equity line of credit * * * ” See 1999 Fed. Election Comm. Annual Rep. at 45 (2000). The Commission recognized that, since the FECA was first enacted, financial institutions have created new financing products to allow consumers more access to credit. The Commission recommended that the FECA be amended to allow candidates to access these new forms of credit to finance their campaigns for federal office, provided that the extension of credit is done in accordance with applicable law, under commercially reasonable terms and by persons who make these loans in the normal course of their business. Id.

In the Department of Transportation and Related Agencies Appropriations Act, 2001, Congress amended the FECA (2 U.S.C. 431(8)(B)) to exclude from the definition of contribution “a loan of money derived from an advance on a candidate's brokerage account, credit card, home equity line of credit, or other line of credit available to the candidate* * * ” The amendment also included the three conditions contained in the Commission's legislative recommendation described above. The Department of Transportation and Related Agencies Appropriations Act, 2001, became Public Law 106-346 on October 23, 2000. 1

The Commission is issuing these final rules to implement this amendment to the FECA. The final rules also include the reporting requirements associated with obtaining and repaying loans derived from brokerage accounts, credit card advances, and lines of credit. In addition to publishing the final rules in the Federal Register , the Commission is submitting these final rules to Congress for 30 legislative days before publishing an effective date. See 2 U.S.C. 438(d). This submission will satisfy the requirements of the Administrative Procedures Act, 5 U.S.C. 553(d), and the Congressional Review of Agency Rulemaking Act, 5 U.S.C. 801(a)(1), requiring agencies to submit final rules to the Speaker of the House of Representatives and the President of the Senate and to publish them in the Federal Register at least 30 calendar days before they take effect. The final rules on brokerage loans and lines of credit were transmitted to Congress on May 28, 2002.

On July 25, 2001, the Commission published a Notice of Proposed Rulemaking (“NPRM”) containing its proposal to make the regulatory changes that would implement the amendment to the FECA to permit candidates to receive advances from their brokerage accounts, credit cards, home equity lines of credit, or other lines of credit. 66 FR 38576. The Commission raised several issues in the NPRM and solicited comments on those issues, as well as the proposed rules in general. The Commission also announced that it would hold a public hearing on September 19, 2001, if there were sufficient requests to testify. The deadline for submitting comments and requesting to testify at the public hearing was August 24, 2001. Because the Commission did not receive any requests to testify, it canceled the public hearing. The notice of the cancellation was published in the Federal Register on September 11, 2001. 66 FR 47120. The Commission received only one comment, which was from Mr. Scott Holz, Senior Counsel at the Board of Governors of the Federal Reserve System.

In order to exempt loans covered by this amendment to the FECA from the definition of “contribution,” the final rules amend 11 CFR 100.7(b) by changing the introductory language of paragraph (b)(11) and adding a new 11 CFR 100.7(b)(22) to include brokerage loans, credit card advances, and other lines of credit made to candidates as among the items that are not considered contributions. The amended and new paragraphs track the language of the amendment to the FECA including the conditions set forth, along with some additional clarifications and guidance regarding reporting requirements.

The Commission recognizes that commercial banks offer various lines of credit to their customers. Because the amendment to the FECA specifically establishes different criteria for lines of credit for candidates, the Commission is amending 11 CFR 100.7(b)(11) to exempt specifically brokerage loans, credit card advances, and other lines of credit extended to candidates from the requirements of bank loans contained in section 100.7(b)(11). The final rules amend paragraph (b)(11) by adding a sentence at the end of the introductory text that states that brokerage loans, credit card advances, and other lines of credit made to candidates under section 100.7(b)(22) are not subject to section 100.7(b)(11). This exception also includes overdrafts made on personal checking or savings accounts of candidates because overdraft protection is one form of a line of credit. Thus, overdrafts made on a candidate's personal bank accounts are subject to the requirements of new section 100.7(b)(22). It is important to note that section 100.7(b)(11) will still apply to all loans and lines of credit made to a political committee and to conventional bank loans made to a candidate. No substantive comments were received regarding this issue.

New paragraph (b)(22) implements the three statutory requirements for obtaining a loan derived from an advance on a candidate's brokerage account, credit card, home equity line of credit, or other line of credit, which are: that the loan is made in accordance with applicable law; that the loan is made under commercially reasonable terms; and that persons making the loans make such loans in the normal course of their business. This new regulation also addresses situations where there are endorsers, guarantors, or co-signers of these loans. New paragraph (b)(22), similar to current paragraph (b)(11), provides that an endorser, guarantor, or co-signer is considered a contributor for the amount that the endorser, guarantor or co-signer is liable. This information must be disclosed on the Schedule C or C-P. See below. The exception is when the endorser, guarantor, or co-signer is the spouse of the candidate and the candidate's share of collateral used to obtain a secured loan equals or exceeds the amount of the loan. See 11 CFR 100.7(a)(1)(i)(D). Under proposed section 100.7(b)(22)(ii)(B) in the NPRM, when a spouse is an endorser, guarantor, or co-signer of an unsecured loan, the spouse would not be considered a contributor if the candidate uses, in connection with the campaign, only one-half of the available credit. The Commission sought comments on whether the regulations should allow the candidate to use the entire amount of the available credit for use in connection with a campaign in instances where the loan is in the ordinary course of business and the candidate is liable for the entire amount of the loan even though the spouse has endorsed, guaranteed, or co-signed for the loan. The Commission received no comments on this issue. In order for new section 100.7(b)(22)(ii)(B) to be consistent with the existing requirements of current paragraphs 100.7(a)(1)(i)(D) and (b)(11) regarding spouses who are endorsers, guarantors, or co-signers, 2 the Commission decided not to change the language in the proposed rule. Because no collateral is offered for unsecured debt, one-half of the available credit is a reasonable amount.

Finally, section 432(e)(2) of the FECA and 11 CFR 101.2 state that a candidate is an agent of the candidate's authorized committee when he or she obtains a loan for use in connection with a campaign. Given that Public Law 106-346 did not distinguish loans derived from an advance on the candidate's brokerage account, credit card, home equity line of credit, or other line of credit, from other types of loans, a candidate who obtains these loans for use in connection with the candidate's campaign is acting as an agent for his or her authorized committee under 2 U.S.C. 432(e) and 11 CFR 101.2.

In addition to provisions described above, new section 100.7(b)(22) contains a provision that addresses loans derived from an advance on the candidate's brokerage account, credit card, home equity line of credit, or other line of credit that are used for the candidate's routine living expenses. The Commission has determined that such loans would not violate 2 U.S.C. 439a or 11 CFR 113.2(d), prohibiting personal use of campaign funds. The loan, however, must be repaid from the candidate's personal funds.

The Commission sought comment in the NPRM on whether the final rules should contain a descriptive and/or inclusive definition of the phrase “personal living expenses.” The Commission did not receive any comments on this question. Upon further examination of 11 CFR part 100, the Commission has determined that “personal living expenses” are no different than “routine living expenses” as described in 11 CFR 100.8(b)(22). Because it is unnecessary to introduce a new term into the regulations in this instance, the Commission has decided to use “routine living expenses” in new section 100.7(b)(22)(iii) instead of “personal living expenses.”

Although the final rules do not define “personal living expenses,” the Commission has determined that it may be useful if this Explanation and Justification includes examples of items that are considered to be “routine living expenses,” recognizing that it would be impossible to describe every possible expense of a candidate that is not for the purpose of influencing the candidate's election to Federal office. The examples are: (1) Household items or supplies, including food, furniture, and accessories; (2) funeral, cremation, or burial expenses; (3) clothing, other than clothing purchased to attend campaign related events or appearances; (4) tuition payments, other than those associated with training relating to the campaign; (5) mortgage, rent, and utility payments, and maintenance and repair expenses associated with residential real property; (6) investment expenses such as acquiring securities on margin if no amount of the investment and its proceeds are used for the purpose of influencing the candidate's election for Federal office; (7) vehicle expenses, including loan payments, gas, insurance, maintenance, and repair; (8) charitable donations unless the candidate receives compensation for services to the charitable entity that become personal funds of the candidate and then are used for the purpose of influencing the candidate's election for Federal office; and (9) travel expenses if the travel is unrelated to the campaign.

A. Loans Used Exclusively for Routine Living Expenses. In the NPRM the Commission sought comments on whether the final rule should require the candidate's authorized committee to report loans used exclusively for the candidate's routine living expenses. The Commission did not receive any comments on this issue. If a candidate used all of the loan proceeds for routine living expenses, then it logically follows that none of the loan proceeds is used for the purpose of influencing the candidate's election for federal office. Therefore, the Commission concludes that the reporting requirements in the final rule, which remains unchanged from the proposed rule, are a reasonable approach to loans used for this purpose. Under new paragraph 100.7(b)(22)(iii)(A), loans used solely for routine living expenses do not need to be reported in accordance with 11 CFR part 104.

B. Loans Used for Routine Living Expenses and for the Purpose of Influencing the Candidate's Election for Federal Office. Unlike loans that are used exclusively for routine living expenses, the final rules require reporting of loans that are used both for routine living expenses and for the purpose of influencing the candidate's election for federal office. Under new section 100.7(b)(22)(iii)(D), if a loan or an advance that is derived from the candidate's brokerage account, credit card, home equity line of credit, or other line of credit is used for the purpose of influencing the candidate's election for Federal office and for other purposes, including routine living expenses, then the portion that is used for the purpose of influencing the candidate's election for Federal office must be reported under 11 CFR part 104. For example, if a candidate establishes a margin account with a brokerage firm to acquire additional securities on margin and to obtain non-purpose credit to finance the campaign, then the non-purpose credit used to finance the campaign must be reported, but the credit used to purchase securities purchased on margin does not need to be reported.

C. Repayments of Loans Used for Routine Living Expenses by Third Parties. Under new paragraphs (b)(22)(iii)(C), the candidate's principal campaign committee must report a loan that is used for routine living expenses if a third party, except the candidate's spouse, repays, guarantees, endorses, or co-signs the loan, in part or in whole. The third party is deemed to make a contribution in the amount of the endorsement, guarantee, or liability and this amount would be subject to the limitations and prohibitions of the FECA. See 11 CFR 113.1(g)(6). Thus, if a third party repays, guarantees, endorses, or co-signs the loan, the authorized committee must report the loan and the repayment under 11 CFR 104.3, 104.8 and 104.9.

D. Defining “Used for the Candidate's Campaign”. In addition to seeking comment on whether the term “personal living expenses” is sufficiently descriptive and inclusive, the Commission also sought comment on whether the final rules should define the scope of the phrase “used for the candidate's campaign,” which is included in proposed section 100.7(b)(22)(ii)(A) in the NPRM and is derived from 2 U.S.C. 432(e)(2). No comments concerning this issue were received. After additional analysis, the Commission decided not to define the phrase “used for the candidate's campaign.” Rather, the phrases “used for the candidate's campaign” and “used in connection with the campaign” (in proposed section 100.7(b)(22(ii)(B) in the NPRM) have been replaced by the phrase “used for the purpose of influencing the candidate's election for Federal office” in the final rules. This new phrase is derived from the statutory language in 2 U.S.C. 431(8)(A)(i). 3 The amendment to the FECA, that is the basis of this rulemaking, added loans derived from an advance on a candidate's brokerage account, credit card, home equity line of credit, and other lines of credit available to the candidate to the list of valuable services in 2 U.S.C. 431(8)(B) that are not considered as contributions. It is appropriate to use similar terminology because regulatory language should reflect the statutory language on which it is based and section 100.7 is grounded in 2 U.S.C. 431(8).

The only difference is that the regulatory language of new paragraph 100.7(b)(22) limits the application to the candidate's election, not to any election, for Federal office. For example, if Candidate X uses a draw on his own personal line of credit to make a contribution to Candidate Y's campaign, then Candidate X's committee does not have to report the draw.

The final rules do not contain a definition of “used for the purpose of influencing the candidate's election for Federal office” because the meaning of the phrase “for the purpose of influencing any election for Federal office” has been extensively discussed in advisory opinions, enforcement actions (matter under review or “MUR”), and court cases. See e.g. FEC v. Ted Haley Cong. Comm. , 852 F.2d 111, 114-16 (9 th Cir. 1998); Advisory Opinions 1983-12, 1990-5, and 1992-6; MUR 3918 (Hyatt for Senate). The court cases, advisory opinions, and enforcement actions provide guidance on when a loan is being used for the purpose of influencing the candidate's election for Federal office.

E. Bank Loans Used for Routine Living Expenses. The NPRM sought comments on whether the final rules should make similar clarifications regarding the reporting of bank loans that are used solely for the candidate's personal living expenses. The Commission did not receive any comments on this issue. The FECA standards for bank loans are higher than those for loans derived from a candidate's brokerage account, credit card, home equity line of credit, or other lines of credit. Bank loans are required, among other things, to be made on a basis that assures repayment and must be subject to a due date or amortization schedule, requirements that do not generally exist for loans derived from a candidate's brokerage account, credit card, home equity line of credit, or other lines of credit. See 2 U.S.C. 431(8)(B)(vii)(II). Thus, the FECA already provides for greater safeguards ensuring repayment of bank loans. Consequently, the Commission has concluded that it is not necessary to amend the bank loan rules at this time to address more specifically loans whose proceeds are used for routine living expenses.

Under new section 100.7(b)(22)(iv), the candidate's authorized committee will have the option of repaying the loan directly to the lending institution or to the candidate. The NPRM included an alternative approach as to how the candidate's authorized committee must accept and use the proceeds of a loan derived from a candidate's brokerage account, credit card, home equity line of credit, or other lines of credit, and repays that loan. The alternative approach set out in the proposed rules would require that the initial receipt and eventual repayment of the loan must pass through the candidate's personal account. In other words, the lending institution must disburse the loan proceeds to the candidate who would then loan or contribute the money to the authorized committee. If the candidate loans the money to the authorized committee, the committee would be required to repay the loan to the candidate, not to the lending institution, and the candidate would then repay the lending institution. If the candidate makes a contribution as a gift to the campaign, the committee would not repay either the candidate or the financial institution.

The Commission did not receive any comments to this alternative approach. The final rules do not adopt this alternative approach in order to allow the candidates and their authorized committees the flexibility to structure and manage these loans in a manner that fits their needs and circumstances. Requiring that the disbursement and repayment of these loans pass through the candidate's personal bank account may be burdensome and inefficient for some candidates and their committees. Therefore, the final rules allow the candidate and the authorized committee to decide whether the disbursement of the loan proceeds and the loan repayments should pass through the candidate's personal bank account or be paid, and repaid, directly between the financial institution and the authorized committee.

The final rules delete an obsolete reference in the introductory text of 11 CFR 100.7(b)(11) to the Federal Savings and Loan Insurance Corporation (“FSLC”). The FSLC has been dissolved and its deposit insurance responsibilities have been transferred to the Federal Deposit Insurance Corporation pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, Pub. L. 101-73 (August 9, 1989).

Currently, 11 CFR 100.8(b)(12) exempts bank loans from the definition of “expenditure” and contains parallel language to that found in the exceptions to the definition of “contribution” in section 100.7(b)(11). The final rules exempt loans derived from advances on a candidate's brokerage account, credit card, home equity line of credit, or other line of credit available to the candidate, from the definition of “expenditure” by amending section 100.8(b)(12) and by adding a new section 100.8(b)(24). The amendments to section 100.8(b)(12) are similar to the amendments to section 100.7(b)(11). See above. New section 100.8(b)(24) adopts, by reference, the language of new section 100.7(b)(22).

The NPRM included several reporting requirements pertaining to loans derived from an advance on a candidate's brokerage account, credit card, home equity line of credit, or other line of credit for use in connection with the candidate's campaign. Under the proposed rules, the candidate's principal campaign committee would report transactions between the lending institution and the candidate, and between the candidate and the principal campaign committee.

The NPRM also included an alternative reporting approach and sought comments on the approach. Under this alternative, a committee would be required only to report certain limited information about loans derived from advances on brokerage accounts, credit cards, home equity lines of credit, or other lines of credit when the candidate has loaned or contributed outright, as a gift, such funds to the committee. This information would include the name of the institution and any applicable interest rate and the due date. Further, in the situation where the candidate has loaned the funds to the committee, the committee would only be required to report repayments to the candidate, and would not report the repayments by the candidate to the lending institution. This limited reporting approach would be applied to loans from banks as well as to the loans derived from other sources covered by the recent statutory amendment. It would rely on the complaint and audit processes to monitor situations where the lending institution forgives the loan, in part or in whole, or where the candidate relies on third parties to make the repayments to the lending institution. The Commission did not receive any comments on this alternative. The Commission has decided to adopt this alternative reporting approach. The new reporting requirements are described below.

As noted above, the final rules require that loans derived from an advance on a candidate's brokerage account, credit card, home equity line of credit, or other line of credit for use in connection with the candidate's campaign, be reported by the candidate's principal campaign committee. The requirements are set forth in several sections in 11 CFR part 104. In section 104.3, the candidate's principal campaign committee is required to report the loan of money from the candidate as a receipt under revised paragraph (a)(3)(vii)(B). It is also required to report any repayment of the loan to the candidate as a disbursement under revised paragraph (b)(2)(iii)(A). These two paragraphs are amended to reflect that loans from the candidate may derive from a bank loan or an advance from a brokerage account, credit card, home equity line of credit or other lines of credit available to the candidate.

Under the final rules, section 104.3(b)(4)(iii) is amended to specifically include persons who receive repayments from a reporting committee of loans derived from an advance on a candidate's brokerage account, credit card, or lines of credit, as among those who must be identified and itemized in the report. “Persons” in this new section include candidates and lending institutions. Section 104.3(b)(4)(iv) is deleted, removing the requirement that the principal campaign committee report each person who receives a repayment from the candidate.

Current 11 CFR 104.3(d) describes the requirements for reporting debts and obligations. The final rules amend this paragraph to set forth the new reporting requirements for loans derived from advances on a candidate's brokerage account, credit card, home equity line of credit and other lines of credit and for bank loans made to candidates. First, the introductory language of paragraph (d) is amended to make clear that these advances must be reported if they are used for the candidate's campaign even if the advances were received before the individual became a candidate for federal office. Second, the reference to “candidate” in paragraph (d)(1) is deleted to exclude bank loans to candidates from the reporting requirements of that paragraph. Instead of paragraph (d)(1), bank loans to candidates must now be reported in accordance with paragraph (d)(4) in Schedule C-1 or C-P-1. Political committees must continue to report the information listed in paragraph (d)(1) in Schedule C-1 and C-P-1.

The final rules add a new section 104.3(d)(4) to describe the information that must be disclosed in the report about loans to candidates, including bank loans. The new paragraph requires authorized committees to disclose loans derived from an advance from a candidate's brokerage account, credit card, or line of credit on Schedules C, C-P, C-1, and C-P-1. Current Schedules C, C-P, C-1 and C-P-1 have not been revised to reflect the new reporting requirements for loans to candidates from financial institutions. Rather, the instructions to Schedules C, C-P, C-1 and C-P-1, and to the Detailed Summary Pages for Forms 3 and 3P, will be modified to reflect the new reporting requirements under new section 104.3(d)(4). Revisions to the instructions to these schedules will be transmitted to Congress at a later point, and will become effective at the same time as the amendments to the regulations. The revised instructions will be posted on the Commission's Web site ( www.fec.gov ) and will be available to the public through the Commission's Information Division.

Under new section 104.3(d)(4), committees are required to disclose the following information: date, amount and interest rate of the loan; name and address of the lending institution; and type and value of collateral or security, if any. The Commission did not receive any comments pertaining to this section.

Current 11 CFR 104.8 requires that certain receipts, including loans, be disclosed on Schedule A. The final rules add new paragraph (g) to section 104.8 to describe how receipt of bank loans to candidates and loans derived from an advance from a candidate's brokerage account, credit card, or line of credit must be reported on Schedule A. When the candidate's committee receives the funds directly from the lending institution or from the candidate (as a loan or a contribution, as a gift), it is reported as an itemized entry on Schedule A. A cross reference to section 100.7(b)(22)(iii) is also included in new section 104.8(g) regarding the reporting of loans obtained solely for the candidate's routine living expenses. Unlike the proposed rules, the committee is not required to report loan disbursements to the candidate. Also, the loan must be continuously reported on Schedule C or C-P until it is extinguished. The candidate may choose either to loan or to contribute, as a gift, the loan proceeds to the authorized committee. 4 If the money is designated as a contribution when the authorized committee reports the receipt, then the authorized committee cannot repay the underlying loan to the financial institution. Any repayment of the underlying loan would constitute conversion of campaign funds for personal use and is prohibited by 11 CFR 113.2(d). The reporting requirements remain the same. The contribution, as a gift, from the candidate to the authorized committee must be reported as an itemized receipt in Schedule A. The underlying loan must be reported on the Schedule C-1 or C-P-1.

Current 11 CFR 104.9 requires that certain disbursements, including loan repayments, be disclosed on Schedule B. The final rules add new paragraph (f) to section 104.9 to explain how repayments of bank loans to candidates and loans derived from an advance from a candidate's brokerage account, credit card, or line of credit are to be reported on Schedule B. Repayment by the candidate's committee to the lending institution or the candidate is reported as an itemized entry on Schedule B. Unlike the proposed rules, the committee is not required by the final rules to report repayments by the candidate to the lending institution.

Unlike the regulations for bank loans to political committees, the final rules do not require principal campaign committees to submit to the Commission loan agreements or similar documents that are connected with a bank loan to the candidate or a loan derived from an advance from a candidate's brokerage account, credit card, or line of credit. However, the alternative reporting approach, which the Commission has adopted in the final rules, contemplates that in lieu of requiring the candidate's committee to disclose detailed information about these loans, the final rules would require candidates to preserve records pertaining to bank loans to the candidates or loans derived from an advance from a candidate's brokerage account, credit card, or line of credit. This will enable the Commission to conduct investigations and audits when necessary, pursuant to the enforcement and audit authority. See 2 U.S.C. 437g and 438(b). Therefore, the final rules added new paragraph (b)(4) to section 104.14 that lists the following types of documents that candidates must preserve for three years following the date of the election for which they were candidates:

a. Records that demonstrate the ownership of the accounts or assets securing the loans such as statements for accounts that identify the account holders, the owners of the credit card account, and the names on the deed for the home used for a line of credit;

b. Copies of the executed loan agreements and all security and guarantee statements;

c. Statements of account for all accounts used to secure any loan for the period the loan is outstanding such as brokerage accounts or credit card accounts, and statements on any line of credit account that was used for the purpose of influencing the candidate's election for Federal office;

d. For brokerage loans or other loans secured by financial assets, documentation to establish the source of the funds in the account at the time of the loan; and

e. Documentation (check copies etc. ) for all payments made on the loan by any person.

The NPRM solicited comments on whether to require the candidate's principal campaign committee to submit loan agreements and similar documents on loans derived from an advance from a candidate's brokerage account, credit card, or line of credit when the committee files Schedule D. The Commission did not receive any comments on this issue. Because the Commission has decided to adopt the alternative reporting approach, the candidate's principal campaign committee is not required to submit these documents.

The Commission, however, did receive a comment concerning the documents that are required to be maintained under section 104.14. The NPRM listed the Federal Reserve's Form T-4 as among the documents that must be maintained for three years. The commenter stated that non-purpose credit extended from margin accounts does not require a Form T-4. Only those that are extended from non-purpose credit accounts require Form T-4. Also, the brokerage firms generally retain the forms and do not necessarily provide a copy to the customer. Therefore, authorized committees do not need to maintain copies of Form T-4 in their files.

Under the final rules, the third party payments provisions of the definition of “personal use” in 11 CFR 113.1(g)(6) is amended to include a repayment, endorsement, guarantee, or co-signature of a loan derived from a candidate's brokerage account, credit card, home equity line of credit, or other line of credit and used for the candidate's routine living expenses within the meaning of “payment.” A cross reference to section 100.7(b)(22) is included in this paragraph.

The NPRM stated that a loan derived from a brokerage account is obtained by opening a non-purpose credit account. The commenter pointed out that non-purpose credit can also be extended from margin accounts but they are subject to the limitations and regulations of Regulation T, 12 CFR part 220. Under 12 CFR 220.6(e), however, non-purpose credit accounts are not subject to Regulation T's margin requirements but are subject to the rules of the self regulating organizations (“SRO”) that regulate the exchanges. Recognizing that non-purpose credit accounts contain similar inherent risks to margin accounts, the two largest SRO, the New York Stock Exchange (“NYSE”) and the National Association of Securities Dealers (“NASD”), established minimum maintenance margins for non-purpose credit accounts that are applicable to the members in their exchanges. 5 Generally, the minimum maintenance margin is 25 percent. 6 That is, a customer must maintain securities valued at 125 percent of the outstanding non-purpose credit. Individual brokerage firms may require higher maintenance margins.

Title XIII of the Housing and Community Development Act of 1992, Pub. L. 102-550, titled the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (Act) (12 U.S.C. 4501 et seq. ) established OFHEO as an independent office within the Department of Housing and Urban Development to ensure that the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, the Enterprises) are adequately capitalized and operate safely and in compliance with applicable laws, rules, and regulations.

The Enterprises were established and operate under the authority of their respective Federal chartering acts as government-sponsored, privately owned corporations, to be directed by their respective boards of directors to fulfill the public purpose of providing a stable secondary market for residential mortgages. 1

Corporate governance involves the relationships between an Enterprise, its management, board of directors, shareholders, regulators, and other stakeholders. It provides the structure through which the business objectives and strategies of the Enterprises are set as well as delineating the means of attaining those objectives and monitoring business performance. The chartering acts contain several provisions related to matters of corporate governance. For example, Congress therein provided for establishing principal offices, board member composition and qualifications, board of director powers, compensation of executive officers and employees, and common and preferred stock. The chartering acts, however, are silent with respect to other corporate governance provisions that are commonly addressed for state-chartered corporations under State law.

In recent years, regulators, investor organizations, stock exchanges, and corporations themselves have increased their focus on the importance of sound corporate governance practices and procedures to ensure the long-term success of corporations. Sound corporate governance practices and procedures are essential to the safe and sound operations of the Enterprises and accomplishment of their public policy purposes. As one Enterprise noted in its comments to the proposed regulation, “[a] well-qualified and effective board of directors is one of the most important elements in maintaining the safety and soundness of a financial institution.” Thus, corporate governance is one category of risk and risk management that is examined by OFHEO under its annual risk-based examination program and the subject of additional policy guidance.

In furtherance of its safety and soundness supervisory responsibilities, OFHEO routinely conducts risk-based examinations of each Enterprise in four categories: credit, market risk, operations, and corporate governance. As described in the Examination Handbook (Dec. 1998), 2 the corporate governance category is comprised of four programs: (1) The Board Governance Program, which assesses the manner in which the Board of Directors discharges its duties and responsibilities in governing the Enterprise; (2) the Management Processes Program, which assesses the processes used to drive behaviors to support the defined corporate goals, standards, and risk tolerances of the Enterprise; (3) the Audit Program, which assesses the appropriateness of reliance of the Board of Directors management on internal or external audits; and lastly, (4) the Management Information Program, which assesses the effectiveness, accuracy, and completeness of information and reports. The factors and criteria used to assess and evaluate the four program areas are set forth in Risk-based Examinations—Evaluation Criteria (Evaluation Criteria) . 3

In addition to safety and soundness standards contained in the Examination Handbook and the Evaluation Criteria, OFHEO has issued safety and soundness policy guidelines. To date, the guidelines address minimum safety and soundness requirements and safety and soundness standards for information. The policy guideline, titled Minimum Safety and Soundness Requirements, sets forth in broad terms various minimum board and management responsibilities and functions. 4

To further support the supervisory scheme with respect to corporate governance, OFHEO issued a proposed corporate governance regulation, published in the Federal Register on September 12, 2001. 5 The proposed regulation builds upon and reinforces the annual risk-based examination and supervisory program in that it restates and amplifies upon the minimum safety and soundness standards affecting the corporate governance policies and practices of the Enterprises.

To a large extent, the minimum corporate governance standards set forth in the proposed regulation reflect the current practices of the Enterprises and the current supervisory standards of OFHEO. OFHEO conducts a comprehensive program of review of corporate governance at each Enterprise. Supervisory and examination policies provide for oversight of all facets of board and senior management attention to their responsibilities. OFHEO has had a significant portion of its examination function focused on corporate governance and conducts a vigorous review of all areas determined to be of importance. OFHEO has reported in annual examination reports to Congress that each Enterprise has met and exceeded its safety and soundness standards.

OFHEO received eleven comment letters on the proposed regulation. Comment letters were received from (1) Fannie Mae; (2) Freddie Mac; (3) the Board Members of Fannie Mae; (4) the Presidential appointees to the board of Fannie Mae; (5) a former Board Member of Fannie Mae; (6) a lawyer with Gibson, Dunn & Crutcher LLP, who is the Chairman of the American Bar Association's Committee on Corporate Governance, on behalf of Fannie Mae; (7) a Widener University professor, on behalf of Freddie Mac; (8) a Georgetown University Law Center professor, on behalf of Freddie Mac; (9) the National Association of Corporate Directors, an educational, publishing, and consulting organization on board leadership; (10) FM Watch, a coalition of eight trade associations; and (11) Consumer Mortgage Coalition, an association of national residential mortgage lenders and servicers.

Many of the comments addressed general issues with the overall regulation as proposed. Several of the comments described the proposed regulation as confusing. Some comments insisted that the proposed regulation should be withdrawn, alleging lack of legal authority for OFHEO to issue a regulation relating to the corporate governance of the Enterprises, inconsistency with prevailing corporate governance principles, lack of necessity in light of supervisory examinations conducted by OFHEO, and likely detrimental effect on the ability of the Enterprises to attract and retain quality board members and senior management. Conversely, other commenters offered that the proposed regulation is a good starting point, but that OFHEO should strengthen the proposal in various recommended ways so as not to limit the supervisory authority of the agency. Other comments objected to certain provisions as having no counterpart in the regulatory schemes of the bank regulatory agencies, or not being appropriate to the Enterprises. Yet others recommended the adoption of additional and more stringent provisions that would be similar to the regulations or guidelines of bank regulatory agencies.

As explained above, OFHEO is responsible under the Act for ensuring the safety and soundness of the Enterprises. Congress charged OFHEO with express statutory authority to do so and to issue regulations to implement and support its statutory responsibilities. The proposed corporate governance regulation was published in furtherance of that authority and to support the risk-based examination process of the agency. The OFHEO regulation neither supplants nor displaces traditional standards of corporate governance as commonly defined by State laws regarding the relationships of corporate board members and management to shareholders and other stakeholders. Indeed, § 1710.10 of the final regulation explicitly clarifies the applicability of such standards to the Enterprises. In contrast, the regulation in largest part sets minimum standards pertaining to the safe and sound operations of the Enterprises under the Act and the respective chartering acts of the Enterprises.

Notably, the comments of both Enterprises and others reflect recognition of the examination program and supervisory process of OFHEO, including the appropriate supervisory role of the agency in relation to the corporate governance practices and procedures of the Enterprises. Indeed, both Enterprises highlighted that the results of recent examinations indicate that OFHEO has determined that they met or exceeded the examination standards in regard to such matters. That is, no commenter asserted that OFHEO lacks statutory authority to oversee and examine the corporate governance program of the Enterprises.

In order to carry out its statutory role and responsibilities, OFHEO is broadly empowered to determine the manner in which it oversees the safe and sound operation of the Enterprises and how it conducts examinations and the scope of such examinations. As set forth in the Examination Handbook, OFHEO reviews corporate governance matters as an area of risk appropriately subject to examination and oversight to ensure the safety and soundness of the Enterprises.

The proposed corporate governance regulation, however, differs from the regulatory scheme adopted by the bank regulatory agencies. As several comments noted, the Enterprises are not banks or thrift institutions, inasmuch as the Enterprises do not engage in deposit taking or origination of commercial or consumer loans. Most significantly, the Enterprises have no federal deposit insurance. The Enterprises, however, do enjoy a special status under their federally granted charters. OFHEO, therefore, has fashioned standards to reflect the nature of the Enterprises that generally employ as models the regulatory regimes of bank regulatory agencies without imposing the numerous transaction-related limits and constraints that affect insured banks and thrift institutions. The bank regulatory scheme also imposes stringent conflict-of-interest requirements with respect to insider relationships and transactions beyond the management and corporate governance standards applicable to other companies that are not subject to specific requirements under this regulation.

Assertions that the regulation will engender confusion and be detrimental to the ability of the Enterprises to attract and retain qualified board members and senior management, and those contrary assertions that the regulation should go further are addressed below. In responding to the specific comments, OFHEO is guided primarily by pragmatic objectives for which the comments themselves call, that is, to clarify the relationship of the board of directors with management; to support the examination function by providing both greater transparency and enforceability to supervisory standards; and to ensure clarity of the regulation without narrowing the supervisory prerogatives of OFHEO. These objectives guide the changes to the proposed regulation that OFHEO is adopting in the final regulation.

Proposed § 1710.1 reiterates that OFHEO is responsible under the Act for ensuring the safety and soundness of the Enterprises and that, in furtherance thereof, the regulation sets forth certain minimum standards with respect to the corporate governance practices and procedures of the Enterprises. As explained above, the corporate governance regulation establishes a regulatory framework for the performance of the safety and soundness and supervisory responsibilities of OFHEO under the Act. OFHEO received no comments specific to this proposed section and adopts it as proposed with no substantive change.

As described below, OFHEO received comments with respect to the definitions of several of the defined terms and adopts them as proposed and deletes a few and adopts others as modified to conform to changes elsewhere in the regulation.

Agent, entity, and person. The definitions of these terms are deleted as they are not needed in connection with proposed § 1710.14, discussed below.

Board member. The term was proposed to mean a member of the board of directors; and, for purposes of subpart D of this part, the term “board member” included a current or former board member. The definition has been modified by deleting the reference to subpart D and to current or former board members to conform with changes to proposed §§ 1710.30 and 1710.31, discussed below.

Conflict of interest. The definition of this term is deleted as it is not needed in connection with proposed § 1710.14, discussed below.

Executive officer and senior executive officer. The term “executive officer,” was proposed to mean any senior executive officer and any senior vice president of an Enterprise and any individual with similar responsibilities, without regard to title, who is in charge of a principal business unit, division, or function of an Enterprise, or who reports directly to the chairperson, vice chairperson, chief operating officer, or president of an Enterprise; and, for purposes of subpart D (the indemnification provisions), the term “executive officer” included a current or former executive officer. The term “senior executive officer,” was proposed to mean the chairperson of the board of directors, chief executive officer, chief financial officer, chief operating officer, president, vice chairperson, any executive vice president of an Enterprise, and any individual, without regard to title, who has similar responsibilities.

Two commenters noted that the definition of these terms differ from the combined definition of “executive officer” adopted by OFHEO in the executive compensation regulation. 6 The comments recommended that the proposed definition be conformed to the definition set forth in the executive compensation regulation, including the provision that OFHEO will identify the officers who are covered by the definition.

OFHEO has determined not to make the recommended changes. The proposed definitions are essentially similar to the definitions in the executive compensation regulation and do not warrant modification. In addition, the provision that OFHEO will identify the officers covered by the specific requirements of 12 CFR part 1770 is not relevant to the corporate governance regulation and will thus not be incorporated into the final regulation. Also see the discussion below under proposed § 1710.12. The definition has been modified by deleting the reference to subpart D and to current or former board members to conform with changes to proposed §§ 1710.30 and 1710.31, discussed below.

Independent board member. The definition of this term is deleted as unnecessary. See the discussion below under proposed § 1710.11.

Legal expenses and payment. In conformance with changes to proposed §§ 1710.30 and 1710.31, discussed below, the separate definitions of these terms are unnecessary and are deleted.

The proposed section required each Enterprise to elect to follow the corporate governance practices and procedures of one of the following bodies of law, to the extent such provisions are not inconsistent with applicable Federal law, rules, and regulations: the law of the jurisdiction in which the principal office of the Enterprise is located; Delaware General Corporation Law, Del. Code Ann. tit. 8, as amended; or Revised Model Business Corporation Act (RMBCA), as amended. The proposed section also would have required each Enterprise to designate in its bylaws the body of law elected within 90 calendar days from the effective date of the regulation.

Section 1710.10 was proposed to dispel any legal uncertainty as to whether and to what extent standards and procedures of State law apply to corporate governance of the Enterprises. The intent of the proposed approach is to provide the Enterprises with flexibility in structuring their corporate governance practices and procedures while at the same time providing certainty to shareholders and other stakeholders as to the body of corporate law applicable to each Enterprise. The body of law elected by the Enterprises, and legal precedents thereunder, to the extent not inconsistent with applicable Federal standards, set forth the standards of conduct of board members with respect to shareholders.

Two commenters objected to permitting the Enterprises to elect a body of State law or the RMBCA as an inappropriate delegation of the fundamental responsibility of the Federal government for establishing the legal underpinnings of the Enterprises. The comments alleged that the laws applicable to traditional private companies are not fully appropriate for guiding the governance of federally chartered institutions, such as the Enterprises, which were created by Congress to meet specific public purposes. The comments recommended that OFHEO clearly state that the chartering acts and other applicable Federal law are the sole source of the powers of the Enterprises.

OFHEO agrees that the Enterprises are not simply private companies chartered under State law. They were established by Congress and operate under the authority of their respective Federal chartering acts, as government-sponsored, privately-owned corporations, to be directed by their respective board of directors, in compliance with law and regulation and to fulfill particular public purposes. 7 The chartering acts contain various specific corporate governance provisions that are clearly within the realm of the congressionally mandated oversight by OFHEO of the safe and sound operations of the Enterprises. In addition, OFHEO has broad supervisory authority over the corporate behavior of the Enterprises from a safety and soundness perspective. The regulation does not delegate authority to the States, does not in any manner abrogate Federal authority, and does not expand the lawful powers and activities of the Enterprises under their respective chartering acts.

Moreover, the section requiring the election of a specific body of law establishes, in effect, a “safe harbor” for an Enterprise that undertakes a corporate governance program conforming to corporate practices and procedures of State law or the RMBCA. An Enterprise and its officers and board members may reasonably assume that corporate practices, procedures, and behaviors that conform to those standards shall be deemed to be safe and sound unless inconsistent with the chartering act or other applicable Federal law, rule, or regulation, or other guidance or directive from OFHEO. 8 In order to underscore that neither State corporate law nor the RMBCA is incorporated wholesale by the election of such a body of law by an Enterprise, OFHEO has revised proposed § 1710.10.

Fannie Mae specifically recommended that the election of law provision be expanded to allow the choice of either the District of Columbia or Virginia, the two jurisdictions in which the Enterprise has significant operations. OFHEO believes the location of the corporate headquarters provides a reasonable nexus for choice of law. The additional options of either Delaware State law or the RMBCA allow for a choice of laws that are well developed by the courts. No further expansion of choice of law is appropriate at this time.

Finally, one commenter requested that the time period to implement the designation in the bylaws of the body of law elected be lengthened to provide sufficient time for the drafting, review and adoption of the requisite amendment to the bylaws. OFHEO has determined not to increase the time period for implementation in light of the 60-day delayed effective date, which, when added to the 90-day implementation period, provides the Enterprises sufficient time.

Paragraph (a) of the proposed section required that an Enterprise provide in its bylaws for the establishment of committees of the board of directors. It also provided that no committee of the board of directors shall have the authority of the board of directors to amend the bylaws and no committee shall operate to relieve the board of directors or any board member of a responsibility imposed by applicable law, rule, or regulation.

Paragraph (b) of the proposed section required that each Enterprise provide in its bylaws, within 90 calendar days after the effective date of this regulation, for the establishment of two committees, however styled: an audit committee that is in compliance with the charter, independence, composition, expertise, and all other requirements of the audit committee rules of the NYSE; and a compensation committee, to include at least three independent board members, the duties of which include, at a minimum, ascertaining that compensation plans for executive officers and employees comply with applicable laws, rules, and regulations and approving the compensation of senior executive officers.

The Enterprises asserted that paragraph (a) is unnecessary in that State law and the RMBCA already provide that board of directors may establish committees and that the board of directors may rely on reports from such board committees in directing the corporation. OFHEO agrees and has modified the final section accordingly. Although board members may rely on reports of various committees, it must be emphasized, however, that the ultimate responsibility for the direction of the Enterprises rests with the entire board of directors.

The Enterprises also objected to the requirement for the establishment of audit and compensation committees as unnecessary because (1) neither the Code of Virginia, District of Columbia Code, the General Delaware Corporation Law, nor the RMBCA require audit or compensation committees; and (2) the Enterprises have established such committees and are required to establish an audit committee by the NYSE listing agreement. Another commenter recommended that OFHEO not adopt the definition of “independent board member” as defined by the NYSE, but rather establish rules specifically adapted to the special circumstances of the Enterprises to ensure that the board members are truly independent.

Audit and compensation committees play important roles in the safe and sound operations of the Enterprises and OFHEO has determined, therefore, to retain the requirement for both committees. With respect to the audit committee, OFHEO has determined to retain the reference to the rules of the NYSE, but with the addition of the proviso “or as otherwise provided by OFHEO,” clarifying that OFHEO may issue subsequent guidance with respect to the audit committee's composition in the event that an Enterprise is no longer listed with the NYSE or that the NYSE audit committee rules are no longer found to be adequate.

OFHEO has determined to delete the definition of “independent board member” that was proposed in § 1710.2. What constitutes independence of board members is adequately defined under the NYSE rules, unless OFHEO determines additional guidance is needed.

Proposed § 1710.12 provided that the compensation of board members, executive officers, and employees is not to be in excess of that which is reasonable and commensurate with their duties and responsibilities and comply with applicable laws, rules, and regulations. The Enterprises asserted that the proposed section exceeds the statutory authority of OFHEO under Section 1318 of the Act, 9 which purportedly limits OFHEO to prohibiting an Enterprise from providing compensation to an executive officer that is not reasonable and comparable with compensation for employment in other similar businesses involving similar duties and responsibilities.

Section 1318 specifically charges OFHEO to prohibit excessive compensation with respect to certain executive officers. A regulation to implement that provision of the Act was adopted on September 12, 2001. 10 Section 1318, however, does not address the separate and primary authority of OFHEO to ensure the safe and sound operations of the Enterprises, under which authority § 1710.12 is issued. That authority is founded in Sections 1302(6) and 1313 of the Act. 11

Congress has made clear that safety and soundness encompasses regulatory action regarding excessive compensation. 12 The bank regulatory agencies explicitly prohibit compensation that is unreasonable or disproportionate to the services performed by an executive officer, employee, or board member, or that could lead to a material financial loss to an institution. See the Interagency Guidelines Establishing Standards for Safety and Soundness, for the Office of the Comptroller of the Currency, 12 CFR part 30; for the Board of Governors of the Federal Reserve System, 12 CFR part 263; for the Federal Deposit Insurance Corporation, 12 CFR part 308, subpart R; and for the Office of Thrift Supervision, 12 CFR part 570.

Section 1710.12 provides for OFHEO to review the adequacy of compensation polices and procedures used by each Enterprise under the obligatory oversight of the board of directors. 13 Section 1710.12 reflects OFHEO examination guidelines used to ensure that policies and practices established by the Enterprises avoid compensation that creates perverse incentives for board members, executive officers, and employees.

The Enterprises also suggested that proposed § 1710.12 is essentially an attempt by OFHEO to set salaries at the Enterprises. OFHEO disagrees. Routine practice under similar Federal standards has not demonstrated any “setting” of compensation by Federal regulators.

Two other commenters recommended that OFHEO impose an explicit requirement that the compensation structure of an Enterprise consider the extent to which the individual officer or employee contributes to the fulfillment of the public purpose of the Enterprise. OFHEO has determined that there is no need to reiterate such an expectation in the regulation.

Proposed § 1710.13 required that each Enterprise provide in its bylaws that, for the transaction of business, a quorum of the board of directors is a majority of the entire board of directors and that a board member may not vote by proxy.

Freddie Mac suggested that the proposed section would unnecessarily and inappropriately supplant otherwise applicable State law and override a Virginia State law provision, which Freddie Mac follows, that permits a company's articles of incorporation or bylaws to adjust the quorum requirement either upward or downward. Freddie Mac asserted that although its bylaws are in compliance with the proposed section, there is no reason for OFHEO to restrict its flexibility.

The Code of Virginia (VA Section 13.1-689), the Delaware General Corporation Law (Section 141), the RMBCA (Section 8.24) include quorum requirements that permit a quorum of no less than one-third of the total number of the members of the board; the District of Columbia Code is silent. None of those bodies of law address proxy requirements. The proposed quorum and proxy requirements are appropriate minimum standards for Federal safety and soundness purposes necessary to ensure the participation of board members in the deliberative processes of the Enterprises. OFHEO has determined, therefore, to retain the requirements. The proposed language is revised, however, to clarify that the Enterprise may increase the quorum requirement upward when deemed by the Enterprise to be appropriate.

Section 1710.14, as proposed, required that each Enterprise establish and administer written conflict-of-interest standards that would provide reasonable assurance that board members, executive officers, employees, and agents of the Enterprise discharge their responsibilities in an objective and impartial manner. As proposed, the term “conflict of interest” would be defined in § 1710.2(g) as an interest in a transaction, relationship, or activity that might affect adversely, or appear to affect adversely, the ability to perform duties and responsibilities on behalf of the Enterprise in an objective and impartial manner.

In conducting the risk-based examination of the Enterprises with respect to corporate governance, OFHEO assesses whether the board of directors ensures that executive management appropriately defines the operating parameters and risk tolerances of the Enterprise consistent with, among other things, ethical standards. The evaluation criteria for this assessment factor include: (1) Is there an appropriate Code of Conduct? (2) Does the board receive periodic reports on compliance with the Code of Conduct?  14 OFHEO also assesses whether management effectively conveys an appropriate message of integrity and ethical values. 15 In addition, one of the criteria used to determine if the Enterprise has effective programs for recruiting competent staff, is whether employee retention and promotion criteria are aligned with codes of conducts and other behavioral guidelines of the Enterprise. 16

One commenter suggested that the definition of the term “conflict of interest” be revised so that it does not refer to a person's ability to perform duties and responsibilities “in an objective and impartial” manner. The commenter suggested that any conflict of interest provision should do no more than require the Enterprises to establish and administer written standards that are designed to preclude situations in which board members, executive officers, and employees face a conflict of interest when discharging their responsibilities on behalf of the Enterprise. Another commenter recommended defining a conflict of interest as a situation in which an actual or apparent question of loyalty arises between a board member's personal interest (financial or otherwise) and his or her responsibilities to the Enterprise.

OFHEO has determined not to adopt these recommendations, but has revised § 1710.14 to clarify that the discharge of duties and responsibilities is on behalf of the Enterprise. In addition, the definition of conflict of interest has been deleted because the examination guidance provided in the Evaluation Criteria is adequate and the concept of conflict of interest is a fundamental concept widely understood under traditional precepts of corporate law. OFHEO will continue to review conflict-of-interest standards of the Enterprises and will take action as necessary to ensure that such standards are adequate.

Objections were raised to the use of the term “assurance” with respect to the phrase “standards that will provide reasonable assurance.” It is not possible for the Enterprises, the commenters explain, to guarantee the state of mind of the affected individuals. Section 1710.14, as proposed, does not require that the conflict-of-interest standards “guarantee” that board members, executive officers, employees, and agents will always act in an objective and impartial manner. Rather, § 1710.14 is intended to require that the conflict-of-interest standards be so crafted and implemented so as to ensure that compliance with them will provide reasonable assurance that the affected individuals are to act in an objective and impartial manner on behalf of the Enterprise. To clarify this intent, the language of § 1710.14 has been revised to provide that the written conflict-of-interest standards be “reasonably designed to assure” the appropriate conduct.

Objections were also raised to the proposal that the conflict-of-interest standards be required of agents of the Enterprises. Inasmuch as the principal purpose of the regulation is to provide greater transparency as to the respective roles and responsibilities of the board of directors and management, the practices and policies of agents of the Enterprises are beyond the immediate focus of the regulation. Such matters appropriately remain as a matter of course within the proper scope of review by management of each Enterprise in effecting the routine management of its business operations. Therefore, that portion of proposed § 1710.14 related to the inclusion of agents within the conflict-of-interest standards has been deleted. If, at a later time, OFHEO finds it necessary to revisit such matters, it will do so in an appropriate manner. OFHEO expects each Enterprise to ascertain and address any potential or perceived conflict-of-interest an agent may present as a matter of routine business practice.

Two commenters also recommended that OFHEO expand § 1710.14, as proposed, (1) to specifically prohibit an Enterprises from retaliating against an individual or entity that advocates a public policy position adverse to that of the Enterprise, and (2) to require each Enterprise to disclose, at least annually, a list of all employees whose total annual compensation exceeds $100,000 and employees who have been employed, or whose spouse or immediate family member has been employed, by the Federal government, including the Congress, in the last five years. Both recommendations, however, are rejected as being beyond the scope of the proposed regulation.

Proposed § 1710.20 would have explicitly required that each board member, in conducting the business of the Enterprise, is to act: (1) On a fully informed, impartial, objective, and independent basis; (2) in good faith and with due diligence, care, and loyalty; (3) in the best interests of the shareholders and the Enterprise; and (4) in compliance with the chartering act of the Enterprise and other applicable laws, rules, and regulations. Furthermore, the proposed section would have required that each board member of an Enterprise is to devote sufficient time and attention to his or her responsibilities in conducting the business of the Enterprise.

Proposed § 1720.21 provided that the board of directors is responsible for managing the conduct and affairs of the Enterprise to ensure that the Enterprise is operated in a safe and sound manner. It included responsibilities such as hiring qualified senior executive officers; ensuring the integrity of the accounting and financial reporting systems of the Enterprise, including independent audits; and remaining informed of the condition, activities, and operations of the Enterprise.

Several commenters objected to proposed §§ 1710.20 and 1710.21 inasmuch as they allegedly depart from prevailing State law by making so-called “aspirational standards” enforceable standards, with the potential threat of civil penalties for nonobservance. That is, the proposed regulation would effectively expose board members to a standard of liability arguably stricter than that of the traditional business judgment rule under State law. The commenters argued that the proposed section could cause a well-advised person not to choose a board position at one of the Enterprises when he or she has attractive opportunities to serve elsewhere in a lower risk environment. In addition, the commenters asserted that the proposed provision would cause confusion when compared to the duty of care standards provided under State law and the RMBCA. The commenters asserted that the potential liability of board members should be limited under the business judgment rule, so that, absent self-dealing or bad faith, a board member would not be held liable for what in hindsight might be determined by the agency to have been unreasonable conduct.

OFHEO agrees that it would be inappropriate for OFHEO to alter the liability standard of the business judgment rule with respect to a board member's potential exposure to shareholder actions against an Enterprise. Neither proposed § 1710.20 nor proposed § 1710.21 does so; neither section addresses nor impinges on the business judgment rule, shareholder rights, or board member accountability to shareholders. Rather, proposed section § 1710.20 would set forth minimum standards of board member conduct and proposed § 1710.21 would enumerate certain of the minimum responsibilities of the board of directors deemed to be integral to the safe and sound operation of the Enterprise for Federal supervisory purposes. 17 OFHEO enforces compliance with minimum standards in furtherance of the congressionally-mandated supervisory responsibilities of OFHEO. OFHEO has revised § 1710.21 and expressly states that the section is not intended to affect the potential exposure of board members to shareholder actions under applicable standards of State law.

The arguments that OFHEO, in proposed §§ 1710.20 and 1710.21, would undo State corporate governance law are not only incorrect, but are contrary to the purpose and intentions of § 1710.10, which would require each Enterprise to elect a body of State law or the RMBCA. The regulation would require that a body of law be selected. OFHEO also addresses its supervisory obligations under Federal law to oversee the safe and sound operations of the Enterprises. The obligations of OFHEO are separate and apart from traditional matters of State law. While the comments made on this topic were instructive on the history, progression, and direction of State corporate governance law, they bear little or no relevance here. OFHEO has been consistent in the proposed rule—election of a State law or the RMBCA is directed, in line with the need to protect shareholders and promote corporate purposes; adherence to Federal standards for safe and sound operations pursuant to a separate and distinct regulatory regime are set forth as well. This is not inconsistent, but rather is the nature of Federal and State relations across a broad range of federal regulatory regimes where private companies operating under State laws (whether or not federally charted) are subject to Federal standards based on the exercise by Congress of its constitutional authorities. In all of these regimes, companies and their boards operate with an eye toward both Federal and State law and regulation.

Several commenters objected to the use of the term “ensure” with respect to board of director responsibilities and the relationship of the responsibilities of management with that of the board of directors. OFHEO has revised the final section to clarify its intent that OFHEO is not requiring the board of directors to “guarantee” outcomes.

Another commenter recommended that proposed § 1710.20 include a specific reference to the obligation of the board of directors to ensure that the activities of the Enterprise are consistent with the authorities under its chartering act and a specific reference to the oversight of internal controls. OFHEO makes no changes in response to these recommendations; references, however, to the chartering acts and internal controls are retained in the revised section.

Two commenters recommended that the list of responsibilities in proposed § 1710.21 specifically require that presidential appointees to the board are to ensure that the Enterprise fulfills its public mission. They also recommended that the regulation require each Enterprise to establish a separate committee composed of presidential appointees with specific responsibility to publish periodic reports on the Enterprise's fulfillment of its public purposes. OFHEO rejects these recommendations inasmuch as each board member, whether elected by shareholders or appointed by the President, is responsible for overseeing the operation and direction of the Enterprise in accordance with its chartering act and the public purposes set forth therein. The chartering acts do not differentiate between elected and appointed board members with respect to their duties and responsibilities.

Two commenters recommended that OFHEO establish rules, modeled after the Interagency Guidelines Establishing Standards for Safety and Soundness (Interagency Guidelines) of the bank regulatory agencies, that require review by the board of directors and senior management of areas such as internal controls and information systems, internal audits, external audits, credit underwriting policies and procedures, asset quality and asset growth, and privacy and security safeguards. OFHEO has, however, already published examination and other guidance that addresses those areas and does not deem it necessary to include such explicit requirements in this regulation.

Upon review, OFHEO has determined to revise §§ 1710.20 and 1710.21 to ensure that those provisions best complement the supervisory and examination policies of OFHEO. The new § 1710.15, titled Conduct and responsibilities of board of directors, contains general principles while more specific guidance may be found in OFHEO's examination materials. The revised section clarifies that board members are not required to guarantee the successful outcomes of their decisions and deliberations. As discussed above, OFHEO routinely conducts risk-based examinations of the corporate governance operations of the Enterprises, which include regular assessments of the effectiveness with which the board of directors discharges its duties and responsibilities in governing the Enterprise. In doing so, OFHEO may assess individual board member performance, as well as the conduct of the board as a whole. 18 The body of law and legal precedents thereunder elected by the Enterprises pursuant to § 1710.10, to the extent not inconsistent with applicable Federal rules, set forth standards of conduct of board members with respect to shareholders.

Certain revisions and technical modifications, as discussed above, are appropriate to the proposed regulation. These changes are merited because they continue to support the examination program and standards of OFHEO; they do not diminish the flexibility of OFHEO to review corporate behavior and to determine if safe and sound operations are threatened or a violation of law, rule, or regulation has occurred; and they clarify the intent of OFHEO not to alter the relationship of the board to senior management in day-to-day operations. The board of directors remains responsible for seeing that management adopts policies and procedures that adequately address areas of corporate practice and concern. On this last point, the revised regulation maintains the current strong framework for safe and sound operations and supports the continued ability of the Enterprises to retain and attract the strongest board of directors.

Proposed § 1710.30 generally permitted indemnification payments to a board member or executive officer of an Enterprise, in civil actions or administrative proceedings not initiated or undertaken by OFHEO, provided that such payment would not materially adversely affect the safe and sound operations of the Enterprise. Proposed § 1710.31 would have prohibited indemnification payments in connection with administrative proceedings initiated or undertaken by OFHEO that result in a final order or settlement pursuant to which the board member or executive officer is assessed a civil money penalty or is required to cease and desist from or take any affirmative action with respect to the Enterprise. 19

Several commenters strongly objected to the proposed prohibitions against indemnification in certain enforcement actions initiated by the agency. These commenters asserted that the statutory prohibition in section 1376(g)  20 of the Act (subsection (g)), which expressly prohibits an Enterprise from reimbursing or indemnifying certain individuals for so-called “third tier” civil money penalties under section 1376(b)(3), 21 impliedly constrains the authority of OFHEO to impose such sanctions against corporate insiders in any other circumstances such as in “second tier” situations. The commenters also asserted that the expression of broad authority in proposed § 1710.31 of OFHEO to prohibit indemnification other than in connection with third-tier civil money penalties would make it difficult for the Enterprises to attract and retain qualified board members and executive officers.

OFHEO disagrees with the assertion that it has no authority beyond that contained in subsection (g) to address indemnification. 22 Neither that subsection nor other provisions of the Act explicitly nor implicitly purports to constrain the discretion of the agency to fashion remedies as appropriate in varying circumstances consistent with OFHEO's safety and soundness authorities under the Act.

The commenters also assert that subsection (g) is a penal statute because it defines when individuals must bear the full practical consequence of financial sanctions. According to one commenter, the Act must be construed strictly to prohibit OFHEO from denying indemnification for other than third tier civil money penalties. The explicit language of subsection (g), however, relates only to the inability of an Enterprise to indemnify corporate insiders in certain circumstances; it does not purport to in any way address the discretionary remedial authority of OFHEO. 23 Furthermore, the canon cited by the commenter that penal statutes are to be construed strictly is not to be applied so as to defeat the purpose of all other rules of statutory construction. 24

One commenter would apply the canon of statutory construction known as, expressio unius est exclusio alterius, i.e, the expression of one thing excludes others not expressed, to read subsection (g) to preclude impliedly the denial of indemnification in other circumstances. That is, asserting to apply the canon here, the commenter would interpret the law to mean that because subsection (g) explicitly prohibits the Enterprises from indemnifying for third tier civil money penalties, it impliedly also prohibits OFHEO from denying indemnification in other proceedings. Such an interpretation goes beyond the logical application of the canon, is inconsistent with the limited use of the canon by the courts, and is inappropriate in the context at hand. 25 Indeed, the courts have recognized “an equally pertinent canon of interpretation” that:

Further, OFHEO remains cognizant of the canon of statutory construction known as the “whole statute” interpretation. 27 Because a statute is passed as a whole and not in parts or sections, this canon requires that each section should be construed in connection with every other part or section so as to produce a harmonious whole. 28 Statutes must be construed to further the statutory scheme; “a statutory subsection may not be considered in a vacuum.”  29 Here, the Director is broadly empowered under various sections of the Act to fashion appropriate sanctions and remedies to address varying circumstances of misconduct, such as that resulting from recklessness or fraud, by corporate officials, including officers and directors of an Enterprise. This occurs without regard to other provisions of the Act that curtail the authority of an Enterprise to indemnify such persons in certain extraordinary circumstances.

The commenters also asserted that its restrictive interpretation of subsection (g) is supported by the argument that if Congress had wanted to prohibit indemnification for second tier civil money penalties, it knew how to do so in light of congressional amendment of section 18(k) of the Federal Deposit Insurance Act (FDI Act). 30 More particularly, that law explicitly authorizes the Federal Deposit Insurance Corporation to prohibit indemnification payments to institution-affiliated parties, including board members and executive officers of federally insured banks and thrifts, for penalties and related legal expenses in view of such factors as the agency spells out by regulation. But Congress did not address indemnification in the Act affecting the Enterprises in the same manner as it did for insured banks and thrift institutions under the FDI Act. Logic supports the position that the different statutory formulations of the Act and the FDI Act evidence that Congress knew how to prohibit expressly OFHEO from denying indemnification, but did not do so.

OFHEO rejects the assertion that it has no authority beyond subsection (g) to address indemnification. In order to minimize misunderstanding and to clarify the authority of the agency to fashion appropriate remedies on a case-by-case basis, proposed §§ 1710.30 and 1710.31 have been revised and renumbered as § 1710.20 to require each Enterprise to adopt written policies and procedures concerning indemnification and to recount the authority of OFHEO to fashion appropriate remedies, including indemnification pursuant to its inchoate enforcement authority under various sections of the Act as set forth at 12 CFR part 1780.

Under § 1710.20, the body of law elected by an Enterprise pursuant to § 1710.10 will provide the basis for indemnification by the Enterprise. The Enterprises are authorized to operate under the indemnification requirements set forth by the elected body of State law or the RMBCA. The revisions to the indemnification provision are designed to preclude any misunderstanding as to the applicability of State law or RMBCA provisions that may mandate or provide for indemnification in certain circumstances. Thus, the revised indemnification provisions should not detract from the efforts of the Enterprises to continue to attract and retain qualified board members and executive officers.

The final regulation is not classified as an economically significant rule under Executive Order 12866 because it would not result in an annual effect on the economy of $100 million or more or a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions; or have significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete with foreign-based enterprises in domestic or foreign markets. Accordingly, no regulatory impact assessment is required. The final regulation was reviewed by the Office of Management and Budget under other provisions of Executive Order 12866.

Executive Order 13132 requires that Executive departments and agencies identify regulatory actions that have significant federalism implications. A regulation has federalism implications if it has substantial direct effects on the States, on the relationship or distribution of power between the Federal Government and the States, or on the distribution of power and responsibilities among various levels of Government. The Enterprises are federally chartered corporations supervised by OFHEO. The final regulation sets forth minimum corporate governance standards with which the Enterprises must comply for Federal supervisory purposes. The final regulation requires that each Enterprise elect a body of State corporate law or the Revised Model Corporation Act to follow in terms of its corporate practices and procedures. The final regulation does not affect in any manner the powers and authorities of any State with respect to the Enterprises or alter the distribution of power and responsibilities between State and Federal levels of government. Therefore, OFHEO has determined that the final regulation has no federalism implications that warrant the preparation of a Federalism Assessment in accordance with Executive Order 13132.

The Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) requires that a regulation that has a significant economic impact on a substantial number of small entities, small businesses, or small organizations must include an initial regulatory flexibility analysis describing the regulation's impact on small entities. Such an analysis need not be undertaken if the agency has certified that the regulation will not have a significant economic impact on a substantial number of small entities. 5 U.S.C. 605(b). OFHEO has considered the impact of the final regulation under the Regulatory Flexibility Act. The General Counsel of OFHEO certifies that the final regulation, if adopted, is not likely to have a significant economic impact on a substantial number of small business entities because it is applicable only to the Enterprises, which are not small entities for purposes of the Regulatory Flexibility Act.

On December 17, 2001, FAA issued a proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an AD that would apply to certain Air Tractor, Inc. (Air Tractor) AT-400, AT-500, and AT-800 series airplanes. This proposal was published in the Federal Register as a notice of proposed rulemaking (NPRM) on December 27, 2001 (66 FR 66823). The NPRM proposed to supersede AD 2001-10-04 R1 with a new AD that would retain the safe life for the wing lower spar cap and require you to eddy-current inspect the wing lower spar cap immediately prior to the replacement/modification to detect and correct any crack in a bolthole before it extends to the modified center section of the wing. The NPRM also proposed to further reduce the safe life for those AT-400 and AT-500 series airplanes that incorporate or have incorporated Marburger Enterprises, Inc. winglets.

Since issuance of that NPRM, we received reports of several cracks originating in the outboard 3/8-inch hole of the main spar lower cap on Air Tractor Models AT-502, AT-502A, AT-502B, and AT-503A airplanes at hours time-in-service (TIS) lower than the established safe life.

This condition could result in fatigue cracks in the wing lower spar cap before the established safe life is reached. Fatigue cracks in the wing lower spar cap, if not detected and corrected, could result in the wing separating from the airplane during flight.

The FAA has reviewed all available information and determined that:

This AD:

You must accomplish these actions in accordance with Snow Engineering Service Letter #197 or #205, both Revised March 26, 2001, as applicable.

In preparation of this rule, we contacted type clubs and aircraft operators to obtain technical information and information on operational and economic impacts. We have included, in the rulemaking docket, a discussion of information that may have influenced this action.

Because the unsafe condition described in this document could result in the wing separating from the airplane during flight, we find that notice and opportunity for public prior comment are impracticable. Therefore, good cause exists for making this amendment effective in less than 30 days.

Although this action is in the form of a final rule and was not preceded by notice and opportunity for public comment, FAA invites your comments on the rule. You may submit whatever written data, views, or arguments you choose. You need to include the rule's docket number and submit your comments to the address specified under the caption ADDRESSES. We will consider all comments received on or before the closing date specified above. We may amend this rule in light of comments received. Factual information that supports your ideas and suggestions is extremely helpful in evaluating the effectiveness of the AD action and determining whether we need to take additional rulemaking action.

We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the rule that might suggest a need to modify the rule. You may view all comments we receive before and after the closing date of the rule in the Rules Docket. We will file a report in the Rules Docket that summarizes each FAA contact with the public that concerns the substantive parts of this AD.

If you want us to acknowledge the receipt of your comments, you must include a self-addressed, stamped postcard. On the postcard, write “Comments to Docket No. 2002-CE-10-AD.” We will date stamp and mail the postcard back to you.

These regulations will not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, FAA has determined that this final rule does not have federalism implications under Executive Order 13132.

We have determined that this regulation is an emergency regulation that must be issued immediately to correct an unsafe condition in aircraft, and is not a significant regulatory action under Executive Order 12866. It has been determined further that this action involves an emergency regulation under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979). If it is determined that this emergency regulation otherwise would be significant under DOT Regulatory Policies and Procedures, a final regulatory evaluation will be prepared and placed in the Rules Docket (otherwise, an evaluation is not required). A copy of it, if filed, may be obtained from the Rules Docket.

• A single futures contract or an option on a physical—$5,000;

• A single option on a previously-approved futures contract—$1,000;

• A combined submission of a futures contract and an option on the same futures contract—$5,500.

For multiple contract filings containing related contracts, the product review and approval fees are:

• A submission of multiple related futures contracts—$5,000 for the first contract, plus $500 for each additional contract;

• A submission of multiple related options on futures contracts—$1,000 for the first contract, plus $100 for each additional contract;

• A combined submission of multiple futures contracts and options on those futures contracts—$5,500 for the first combined futures and option contract, plus $550 for each additional futures and option contract.

The Commission recalculates each year the fees it charges with the intention of recovering the costs of operating certain programs. 1 All costs are accounted for by the Commission's Management Accounting Structure Codes (MASC) system operated according to a government-wide standard established by the Office of Management and Budget. The fees are set each year based on direct program costs, plus an overhead factor.

The fees charged by the Commission are designed to recover program costs, including direct labor costs and overhead. The overhead rate is calculated by dividing total Commission-wide direct program labor costs into the total amount of the Commission-wide overhead pool. For this purpose, direct program labor costs are the salary costs of personnel working in all Commission programs. Overhead costs consist generally of the following Commission-wide costs: indirect personnel costs (leave and benefits), rent, communications, contract services, utilities, equipment, and supplies. This formula has resulted in the following overhead rates for the most recent three years (rounded to the nearest whole percent): 105 percent for fiscal year 1999, 117 percent for fiscal year 2000, and 105 percent for fiscal year 2001. These overhead rates are applied to the direct labor costs to calculate the costs of reviewing contract approval requests.

Calculations of the fees for processing requests for product review and approval have become more refined over the years as the types of contracts being reviewed have changed.

On August 23, 1983, the Commission established a fee for Contract Market Designation (48 FR 38214). Prior to its recent amendment, the Commodity Exchange Act (Act) provided for “designation” of each new contract as a “contract market.” The Commodity Futures Modernization Act (CFMA) amended the Act to limit the concept of “contract market designation” to the approval of certain markets or trading facilities on which futures and options are traded, as opposed to approval of a specific contract or product. Commission rules that implemented the CFMA, therefore, charged a fee for the contract review where approval has been requested by a designated contract market or registered derivatives transaction execution facility (DTF). No fee is charged a board of trade for its initial designation as a contract market or registration as a DTF.

The fee, as originally adopted in 1983, was based on a three-year moving average of the actual costs expended and the number of contracts reviewed by the Commission during that period. The formula for determining the fee was revised in 1985. At that time, most designation applications were for futures contracts and no separate fee was set for option contracts.

In 1992, the Commission reviewed its data on the actual costs for reviewing applications for both futures and option contracts and determined that the percentage-of applications pertaining to options had increased and that the cost of reviewing a futures contract designation application was much higher than the cost of reviewing an application for an option contract. The Commission also determined that when applications for a futures contract and an option on that futures contract are submitted simultaneously, the cost is much lower than when the contracts are separately reviewed. 'To recognize this cost difference, three separate fees were established: one for futures; one for options; and one for combined futures and option contract applications (57 FR 1372, Jan. 14, 1992).

The Commission refined its fee structure further in 1999 to recognize the unique processing cost characteristics of a class of contracts—cash-settled based on an index of non-tangible commodities (64 FR 30384, June 8, 1999). The Commission determined to charge a reduced fee for related simultaneously submitted contracts for which the terms and conditions of all contracts in the filing are identical, except in regard to a specified temporal or spatial pricing characteristic or the multiplier used to determine the size of each contract. Contracts on major currencies, defined as the Australian dollar, British pound, Euro (and its component currencies), Japanese yen, Canadian dollars Swiss franc, New Zealand dollar, Swedish krona, and the Norwegian krone (including contracts based on currency cross rates), were determined to be eligible for the reduced multiple contract fees. 2 The Commission determined that a 10 percent marginal fee for additional contracts in a filing would be appropriate for simultaneously submitted contracts eligible for the multiple contract filing fee.

Commission staff compiled the actual costs of processing a request for product review and contract approval for a futures contract for fiscal years 1999, 2000, and 2001, and found that the average cost over the three-year period was $5,000, including overhead. Review of actual costs of processing contract-approval reviews for an option contract for fiscal years 1999, 2000, and 2001 reveal that the average cost over the period was $1,000 per contract, including overhead.

In accordance with its regulations as codified at 17 CFR part 40 appendix B, the Commission has determined that the fee for approval of a futures contract will be set at $5,000 and the fee for approval of an option contract will be set at $1,000. The fee for simultaneously submitted futures contracts and option contracts on those futures contracts and the fees for filings containing multiple cash-settled indices on non-tangible commodities have been set similarly and as indicated in the schedule set forth in the Summary of Fee above.

Section 15 of the Act, as amended by section 119 of the CFMR, requires the Commission to consider the costs and benefits of its action before issuing a new regulation under the Act. Section 15 does not require the Commission to quantify the costs and benefits of a new regulation or to determine whether the benefits of the proposed regulation outweigh its costs. Rather, section 15 simply requires the Commission to “consider the costs and benefits” of its action, in light of five broad areas of market and public concern: protection of market participants and the public; efficiency, competitiveness, and financial integrity of futures markets; price discovery; sound risk management practices; and other public interest considerations. Accordingly, the Commission could in its discretion give greater weight to any one of the five enumerated areas of concern and could in its discretion determine that, notwithstanding its costs, a particular rule was necessary or appropriate to protect the public interest or to effective any of the provisions or to accomplish any of the purposes of the Act.

The submission of new products for Commission review and approved by designated contract markets or DTFs is voluntary. The Commission has therefore concluded that those entities choosing to make such submissions find that the benefits of doing so equal or exceed the fees, which, as explained above, are derived from the Commission's actual processing costs.

The Regulatory Flexibility Act, 5 USC 601, et seq. , requires agencies to consider the impact of rules on small business. The fees implemented in this release affect contract markets and registered DTFs. The Commission has previously determined that contract markets and registered DTFs are not “small entities” for purposes of the Regulatory Flexibility Act. Accordingly, the Chairman, on behalf of the Commission, certifies pursuant to 5 USC 605(b), that the fees implemented here will not have a significant economic impact on a substantial number of small entities.

On December 14, 1999, Pub. L. 106-169, the “Foster Care Independence Act of 1999” was enacted. Section 251(a) of Pub. L. 106-169 added title VIII to the Social Security Act, establishing a new benefit program—Special Benefits for Certain World War II Veterans. Under this program, if you are a World War II veteran who was eligible for SSI for December 1999 and for the month of application for SVB, and who meets other criteria specified in the law, you may be entitled to SVB for each month in which you reside outside the United States.

Section 251(b) of Pub. L. 106-169 amended section 1147 of the Act. Prior to the enactment of Pub. L. 106-169, section 1147 of the Act (added by section 8 of Pub. L. 105-306) allowed SSA to recover SSI overpayments from you, if you were no longer receiving SSI cash payments, by reducing the amount of any benefits payable to you under title II of the Act. Final regulations on recovery of SSI overpayments from title II benefits were published on July 26, 2001, at 66 FR 38902. Section 251(b) of Pub. L. 106-169 amended section 1147 to allow recovery of SSI overpayments from title VIII benefits, as well as title II benefits, payable in a month. Throughout this preamble, this type of overpayment recovery is called “cross-program recovery.” With certain exceptions, the amount of the reduction permitted under cross-program recovery cannot exceed 10 percent of the benefits payable in a month.

On July 26, 2001 we published a Notice of Proposed Rulemaking in the Federal Register at 66 FR 38963 and provided a 60-day period for interested individuals and organizations to comment on the proposed rules. We received one public comment from an individual. A summary of the comment and our response to it follows.

Comment: The commenter believes we should not reduce an individual's SVB payments to recover an SSI overpayment unless there was willful concealment or misrepresentation on the part of the overpaid person. The commenter points out that the overpaid individual is an aged veteran who may not even understand why the overpayment occurred. The commenter argues that, rather than holding the veteran liable, we should make stronger efforts to eliminate payment errors within SSA.

Response: We are not adopting this comment. As indicated above, Congress specifically amended section 1147 of the Act to give SSA authority to use cross-program recovery to recover SSI overpayments from SVB payments. In recognition of the fact that the veteran is an elderly former SSI recipient, Congress limited to 10 percent the amount we may withhold from an individual's monthly SVB payment to recover an SSI overpayment. In addition, in the cross-program recovery notice that we will send to an overpaid individual, we will explain that he/she has both the right to request that we waive recovery of the overpayment and the right to request that we use a rate of withholding that is less than 10 percent of the monthly payment amount. We will waive recovery of an SSI overpayment in any case where the individual was without fault in causing the overpayment and recovery would either defeat the purpose of title XVI (i.e., deprive the individual of income or resources needed for ordinary and necessary living expenses) or be against equity and good conscience (e.g., the overpaid individual changed his or her position for the worse or relinquished a valuable right in reliance on the overpayment). We believe the final rules strike the proper balance between protecting the rights of the overpaid individual and satisfying our obligation to ensure the fiscal integrity of the SSI program.

Regarding payment errors within SSA, we are pursuing several initiatives that address the causes of overpayments in the benefit programs we administer. We are hopeful that these initiatives will help to reduce the number of overpayments that occur.

We are publishing these final rules with only minor changes from the proposed rule.

In order to implement cross-program recovery from SVB, we are modifying several provisions of § 416.572. Paragraph (a) is revised as follows:

• We are revising the definition of “cross-program recovery” to include the process of collecting title XVI overpayments from SVB payable to you in a month.

• We are revising the definition of “benefits payable in a month” to include the amount of SVB you would actually receive in a given month. Under this definition, “benefits payable in a month” includes the monthly SVB amount and any past due SVB you receive, after any reduction by the amount of income for the month as required by section 805 of the Act (42 U.S.C. 1005). We have added to the definition an example to show how we determine SVB payable in a month.

• We changed the language of paragraph (a)(3), as published with the notice of proposed rulemaking, to conform it to the language of the final regulation published at 66 FR 38902, 38907.

We are revising paragraph (b) of § 416.572 to explain that we may use cross-program recovery to collect title XVI overpayments if you are not currently receiving SSI cash benefits and are receiving benefits under title II or title VIII of the Act. Therefore, if your title II and/or title VIII benefits are being adjusted to recover a title XVI overpayment and you again become eligible for SSI benefits, cross-program recovery will end with the month in which SSI cash benefits resume. We will begin collecting the remaining title XVI overpayment by monthly adjustment of SSI payments. We are also revising paragraph (b) to explain that:

• We will not start cross-program recovery from SVB if we already are adjusting SVB to recover an SVB overpayment, and

• We will not start cross-program recovery from title II benefits if we are already adjusting title II benefits to recover an SVB or title II overpayment.

Adjustment of title VIII and title II benefits to recover SVB overpayments is authorized by section 808(a)(1) of the Act (42 U.S.C. 1008(a)(1)).

Paragraph (c) of § 416.572 lists the information that we include in the notice sent to a person whose benefits are subject to cross-program recovery. We are revising paragraph (c)(2) to add that the information will include the amount we will withhold from SVB payable in a month. The notice will state that you may ask us to review our determination that you still owe the overpayment balance and that you may ask us to waive collection of the overpayment balance. The notice will inform you how to request a waiver. Unless you or your spouse willfully misrepresented or concealed material information in connection with the overpayment, the notice also will state that you may request that we withhold from SVB a different amount than the amount stated in the notice.

Paragraph (d) of § 416.572 currently explains that we will begin to withhold no sooner than 30 days after the date of the notice. If you pay the entire overpayment balance within that 30-day period, we will not impose cross-program recovery. If within the 30-day period you ask us to review the determination that you still owe us the overpayment balance and/or request us to waive recovery of the overpayment balance, we will not begin cross-program recovery until we review the matter(s) and notify you of our decision(s). If within the 30-day period, you request that we withhold a different amount, we will not begin cross-program recovery until we determine the amount we will withhold. These provisions apply when we pursue cross-program recovery to collect SSI overpayments from SVB payable under title VIII of the Act. No revisions to the regulatory text are needed.

We are revising paragraph (e) of § 416.572 to explain that when cross-program recovery is applied, we will collect the overpayment at a rate of 10 percent of the title II benefits and SVB payable in any month, respectively. However, we will collect at a rate of 100 percent of the title II benefits and SVB payable in any month if you (or your spouse) willfully misrepresented or concealed material information in connection with the overpayment.

We are revising the language of § 416.570 to state that we will not adjust title XVI benefits to recover SVB overpayments without a specific request from the SSI beneficiary. Without the consent of the overpaid person, we have no authority to recover SVB overpayments from SSI payments.

We have consulted with the Office of Management and Budget (OMB) and determined that these final regulations meet the criteria for a significant regulatory action under Executive Order (E.O.) 12866. Thus, the regulations were reviewed by OMB. However, the estimated amounts of the savings or costs involved do not cross the threshold for an economically significant regulation as defined in E.O. 12866. The estimated program savings from increased collections as a result of implementation of section 251(b)(7) of Pub. L. 106-169 are negligible, less than $2.5 million over the next 10 years. The administrative impact is also negligible.

We certify that these final rules will not have a significant economic impact on a substantial number of small entities because they affect only individuals. Thus, a regulatory flexibility analysis as provided in the Regulatory Flexibility Act, as amended, is not required.

These final rules contain reporting requirements at sections 416.570 and 416.572(e). The public reporting burden is accounted for in the Information Collection Requests for the forms that the public uses to submit the information to SSA. Consequently, a 1-hour placeholder burden is being assigned to the specific reporting requirements contained in these rules. We are seeking clearance of the burden referenced in these rules because the rules were not considered during the clearance of the forms. An Information Collection Request has been submitted to OMB. While these rules will be effective 30 days from publication, these burdens will not be effective until cleared by OMB. We are soliciting comments on the accuracy of the agency's burden estimate; the need for the information; its practical utility; ways to enhance its quality, utility and clarity; and on ways to minimize the burden on respondents, including the use of automated collection techniques or other forms of information technology. We will publish a notice in the Federal Register upon OMB approval of the information collection requirements. Comments should be submitted to the OMB desk officer for SSA within 30 days of publication of these final rules at the following address: Office of Management and Budget, Attn: Desk Officer for SSA, >New Executive Office Building, Room 10230, 725 17th St., NW., Washington, DC 20530.

On June 10, 2002, MSHA will move its Headquarters office from 4015 Wilson Blvd., Arlington, Virginia 22203-1984 to 1100 Wilson Blvd., Arlington, Virginia 22209-3939.

Because this amendment deals with agency management and procedures, the notice and comment provisions of the Administrative Procedure Act do not apply pursuant to 5 USC 553(a)(2) and (b)(3)(A).

Good cause exists to dispense with the usual 30-day delay in the effective date because the amendments are of a minor and administrative nature dealing with a change in address.

This final rule does not contain a new or amended information collection requirement subject to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

This final rule is not a “regulatory action” under section 3 of Executive Order 12866, and has not been reviewed by the Office of Management and Budget. The rule is an administrative action that changes the address of a Federal agency. Because the rule is limited to agency organization, management and personnel, it falls within the exclusion set forth in section 3(d)(3) of the Executive Order.

In promulgating this rule, the Agency has adhered to the regulatory philosophy and applicable principles of regulation set forth in section 1 of the Executive Order.

For purposes of the Unfunded Mandates Reform Act of 1995, this rule does not include any Federal mandate that may result in increased expenditures by State, local or tribal governments, or by the private sector.

On December 10, 2001, we published a notice of proposed rulemaking (NPRM) entitled “Revised Options for Responding to Notices of Violations” in the Federal Register (66 FR 63640). We received 4 letters commenting on the proposed rule. No public hearing was requested and none was held.

We explained the background of Notices of Violations (NOVs) and our recent review of their use in the NPRM. Today, we use NOVs only in small oil discharge (under 100 gallons) and minor violations of our pollution prevention regulations; we have not expanded their use since their introduction in 1994. The changes this rule makes to the NOV process allow it to be more easily administered through our Marine Information for Safety and Law Enforcement system, which came on line in late 2001, and will support expanding the use of NOVs to other programs.

A total of 4 letters were sent to the docket, with one being a clarification of an earlier letter. One commenter stated a party's failure to respond to an NOV within 45 days of its issuance might result from misdelivery of the NOV. If a party claims it failed to receive the original NOV, the Coast Guard's procedures allow us to review the case.

Another commenter suggested changes that are beyond the scope of this rulemaking. Since the changes suggested concern internal Coast Guard processes, we have delivered them to the appropriate offices to review and consider them.

The third commenter expressed support for this rulemaking.

This rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget (OMB) has not reviewed it under that Order. It is not “significant” under the regulatory policies and procedures of the Department of Transportation (DOT)(44 FR 11040, February 26, 1979). We expect the economic impact of this rule to be so minimal that a full Regulatory Evaluation under paragraph 10e of the regulatory policies and procedures of DOT is unnecessary.

As we discussed in the NPRM, this rule only changes the default when a party fails to respond to an NOV within 45 days; currently, only about 1% of all NOV recipients. These parties can avoid the impact of this rule entirely, by making the required NOV response within 45 days.

Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered whether this rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000.

As previously noted, this rule only changes the default when a party fails to respond to an NOV within 45 days. These parties can avoid any impact of this rule, simply by making the required NOV response (to accept or decline the NOV) within 45 days. Therefore, the Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Public Law 104-121), we offered to assist small entities in understanding the rule so that they could better evaluate its effects on them and participate in the rulemaking. Small entities may call the Project Manager listed under FOR FURTHER INFORMATION CONTACT .

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247).

This rule calls for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this rule under that Order and have determined that it does not have implications for federalism.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.

This rule will not effect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.

This rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.

We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not create an environmental risk to health or risk to safety that may disproportionately affect children.

This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.

We have analyzed this rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. It has not been designated by the Administrator of the Office of Information and Regulatory Affairs as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211.

We have considered the environmental impact of this rule and concluded that under figure 2-1, paragraph (34)(a), of Commandant Instruction M16475.lD, this rule is categorically excluded from further environmental documentation. The changes here are procedural and affect only the default treatment of “fail to respond” NOVs. A “Categorical Exclusion Determination” is available in the docket where indicated under ADDRESSES .

The SR 433 swing span drawbridge across Bonfouca Bayou, mile 7.0, at Slidell, St. Tammany Parish, Louisiana, has a vertical clearance in the closed-to-navigation position of 3.5 feet above mean high water and 6.7 feet above mean low water at the pivot pier. The vertical clearance at the rest pier is 8.2 feet above mean high water and 11.4 feet above mean low water in the closed-to-navigation position. The bridge provides unlimited vertical clearance in the open-to-navigation position. Navigation on the waterway consists of tugs with tows, fishing vessels, sailing vessels, and other recreational craft.

Presently, the draw operates as follows: The draw need not open for passage of vessels from 7 a.m. to 8 a.m. and from 1:45 p.m. to 2:45 p.m., Monday through Friday except Federal Holidays. The draw need open only on the hour and half-hour from 6 a.m. to 7 a.m. and from 3 p.m. to 6 p.m., Monday through Friday except federal holidays. The draw shall open on signal from 9 p.m. to 5 a.m., if at least 4 hours notice is given to the Louisiana Department of Transportation and Development Security Service at (540) 375-0100. At all other times the draw shall open on signal.

The Louisiana Department of Transportation and Development requested a temporary deviation for the operation of the drawbridge to accommodate maintenance work. The work involves installation of new electrical parts. This work is essential for continued operation of the draw span of the bridge.

This deviation allows the draw of the State Route 433 swing span drawbridge to remain closed to navigation from 8 a.m. until noon on Wednesday, June 12, 2002.

The CSX Transportation railroad swing span drawbridge across Three Mile Creek, Baldwin County, Alabama has a vertical clearance in the closed-to-navigation position of 10 feet above mean high water and 12 feet above mean low water. The bridge provides unlimited vertical clearance in the open-to-navigation position. Navigation on the waterway consists of tugs with tows and fishing vessels. Presently, the draw opens on signal for the passage of vessels.

CSX Transportation requested a temporary deviation for the operation of the drawbridge to accommodate maintenance work. The work involves replacement of the deficient machinery struts on the bridge. This work is essential for continued operation of the draw span of the bridge and is expected to eliminate frequent breakdowns resulting in emergency bridge closures.

This deviation allows the draw of the CSX Transportation railroad swing span drawbridge to remain closed to navigation from 8 a.m. until 5:30 p.m. on June 17 and 18, 2002.

A notice of proposed rulemaking (NPRM) was not published for this regulation. In accordance with 5 U.S.C. 553(b)(B), the Coast Guard finds good cause exists for not publishing an NPRM. The Coast Guard is taking this action for the immediate protection of the national security interests in light of terrorist acts perpetrated on September 11, 2001. Also, in accordance with 5 U.S.C. 553(d)(3), the Coast Guard finds good cause to exist for making this regulation effective less than 30 days after publication in the Federal Register . Publication of a notice of proposed rulemaking and delay of the effective date would be contrary to the public interest because immediate action is necessary to provide for the safety of the Trans-Alaska Pipeline System (TAPS) terminal and TAPS tank vessels. This temporary rule will replace the temporary rules contained in 33 CFR 165.T17-003, 33 CFR 165.T17-004, and 33 CFR 165.T17-005, all of which expire on June 1, 2002.

The Coast Guard is establishing a temporary security zone while the notice of proposed rulemaking (NPRM) is drafted and published with a request for comments. This temporary final rule is required to ensure a smooth transition from temporary final rule to final rule. This temporary final rule, which we expected to be our proposed final rule, will help ensure protection of the TAPS terminal and TAPS tank vessels during the notice and comment period for the proposed final rule.

This rule is not a significant regulatory action under section 3(f) of Executive Order 12866 and does not require an assessment of potential costs and benefits under section 6(a)(3) of that order. It has not been reviewed by the Office of Management and Budget under that order. It is not significant under the regulatory policies and procedures of the Department of Transportation (DOT) (44 FR 11040; February 26, 1979). The Coast Guard expects the economic impact of this proposal to be so minimal that a full Regulatory Evaluation under paragraph 10e of the regulatory policies and procedures of DOT is unnecessary. Economic impact is expected to be minimal because of the short duration of this rule and the season in which it is in effect.

Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered whether this rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000.

The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities. The number of small entities impacted by this rule is expected to be minimal because of the short duration of the rule. Since the time frame this rule is in effect may cover commercial harvests of fish in the area, the entities most likely affected are commercial and native subsistence fishermen. The Captain of The Port will consider applications for entry into the security zone on a case-by-case basis; therefore, it is likely that very few, if any, small entities will be impacted by this rule. Those interested may apply for a permit to enter the zone by contacting Marine Safety Office, Valdez at the above contact number.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Public Law 104-121), we offered to assist small entities in understanding the rule so that they could better evaluate its effects on them and participate in the rulemaking process. Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247).

This rule contains no information collection requirements under the Paperwork Reduction Act (44 U.S.C. 3501 et. seq. ).

The Coast Guard has analyzed this rule under the principles and criteria contained in Executive Order 13132 and has determined that this temporary final rule does not have sufficient federalism implications to warrant the preparation of a Federalism Assessment.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.

This rule will not affect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.

This rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.

We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not create an environmental risk to health or risk to safety that may disproportionately affect children.

This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.

We have analyzed this rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. It has not been designated by the Administrator of the Office of Information and Regulatory Affairs as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211.

The Coast Guard considered the environmental impact of this rule and concluded that, under Figure 2-1, paragraph 34(g) of Commandant Instruction M16745.1D, this rule is categorically excluded from further environmental documentation. A “Categorical Exclusion Determination” is available in the docket where indicated under ADDRESSES.

For the reasons set forth in the preamble, the Coast Guard amends 33 CFR part 165 as follows:

On March 20, 2002, the Coast Guard published a notice of proposed rulemaking (NPRM) entitled Protection of Naval Vessels in the Federal Register (67 FR 12940). The Coast Guard received five letters commenting on the proposed rule. No public hearing was requested, and none was held.

On February 21, 2002, Coast Guard Commander, Atlantic Area, Marine Safety Division, Response Branch (Amr), published a notice of proposed rulemaking in the Federal Register (67 FR 7992) proposing to establish a permanent subpart G to 33 CFR part 165 and setting out general provisions pertaining to that subpart. On May 13, 2002, Atlantic Area's final rule was published in the Federal Register (67 FR 31958). The general provisions of subpart G are discussed in the preamble to the Atlantic Area rule and would apply to Pacific Area naval vessel protection zones. This rule, applicable in Coast Guard Pacific Area, adds a new § 165.2030, which creates restrictions similar to Atlantic Area's § 165.2025.

Under 5 U.S.C. § 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register . Because naval commanders have an urgent and critical security need to control the movements of vessels in the vicinity of large naval vessels, this rule needs to become effective on June 15, 2002. Otherwise, there will be a regulatory gap when the temporary final rule (66 FR 48780 and 48782), which is now in effect, expires on that date. The Coast Guard believes that its finding of good cause in this instance is consistent with the principle of fundamental fairness which requires that all affected persons be afforded a reasonable time to prepare for the effective date of a rulemaking. This is because the temporary final rule, which has been in effect since September 21, 2002, is very similar to this rule. The Coast Guard believes that the temporary final rule has given the public adequate time to adjust to and prepare for naval vessel protection zones.

These zones are necessary to provide for the safety and security of United States naval vessels in the navigable waters of the United States. The regulations are issued under the authority contained in 14 U.S.C. 91. On September 21, 2001, the Coast Guard published temporary final rules entitled “Protection of Naval Vessels” in the Federal Register (66 FR 48780 and 48782). Before issuing these temporary final rules, no regulations existed implementing 14 U.S.C. 91. The temporary final rules are in effect until June 15, 2002.

We have determined that a continuing need exists for the protection of naval vessels. Therefore, we are implementing a permanent rule that will replace the Pacific Area temporary rule (66 FR 48782) by June 15, 2002.

The Coast Guard received five letters in response to the March 20, 2002 notice of proposed rulemaking (67 FR 12940). Letters from the Suquamish Tribe, the Muckleshoot Indian Tribal Council, the law firm of Morisset Schlosser representing the Tulalip Tribe, and the Northwest Indian Fisheries Commission expressed concern over the rule's potential impact on the treaty fishing rights of federally recognized Indian Tribes in Puget Sound, Washington. The Office of Hawaiian Affairs, a state agency that represents Native Hawaiian interests, expressed concern over the impacts of the proposed rule on ocean activities conducted by Native Hawaiians.

Comment 1. The Puget Sound Tribes stated that they have reserved rights of access for fishing in usual and accustomed places. They conduct fisheries enforcement patrols, perform fisheries and water quality research and harvest shellfish. They stated that such activities may bring tribal members and their vessels in proximity to naval vessels. The Tribes averred that there is a potential for substantial direct effects on their activities in the following circumstances: when the naval vessel protection zone around a moored or anchored naval vessel prevents tribal vessels from fishing in a prime tribal area during peak fishing times; when a transiting vessel interrupts a tribal fishing activity in progress; and when a tribal vessel, while engaged in fishing, drifts into a naval vessel protection zone of a moored or anchored naval vessel.

Response 1. The Coast Guard recognizes the rights of the treaty Indian fishers under the Stevens Treaties, as clarified in the well-known U.S. v. Washington line of cases, beginning with United States v. Washington, 384 F.Supp. 312 (W.D. Wash. 1974). We took those rights into account during the rulemaking process. The Coast Guard acknowledges that there could be some effects if a naval vessel protection zone causes a tribal vessel to be displaced. The rule has built-in flexibility, however, to address the Tribes' concerns. And, based on the Coast Guard's consideration of the comments received, the Coast Guard Thirteenth District will continue to facilitate dialogue between the Tribes and the Navy to develop local implementation policies in Puget Sound designed to minimize the possibility of effects on the Tribes, consistent with security concerns.

Treaty rights are not absolute and must be balanced against the rights of the United States. The Justice Department articulated the position of the United States as follows: “The Justice Department represents the United States on its own behalf and as a trustee on behalf of the affected Indian Tribes who claim fishing rights under the Stevens treaties. No claims have been made [in this case, i.e. U.S. v. Washington ] against the United States. The United States reserves its right to assert all available defenses, including but not limited to navigational servitude and defense powers.” Response by the Department of Justice to Judicial Interrogatories Posed by the U.S. District Court, Western District of Washington, dated 3 November 1992.

In this instance, the treaty rights must be balanced against the United States' inherent right and obligation to safeguard and protect its warships and naval vessels from sabotage and attack. Since the October 2000 bombing of the U.S.S. COLE in Yemen, which was carried out by an explosives-laden small boat, the U.S. military has placed increased emphasis on naval force protection. And the terrorist attacks of September 11, 2001 proved that the U.S. mainland is not immune from attack. Therefore, the Coast Guard has implemented this rule as a force protection measure to help Naval commanders within Pacific Area to protect their ships and their crews.

Comment 2. The Tribes commented that naval vessel security and Tribal fishing rights protection can both be achieved if there is improved communication and coordination, scheduling of port calls and routine non-emergency vessel movements to avoid fisheries, and placement of Tribal liaison personnel on Coast Guard and Seattle Harbor Patrol vessels to assist in the identification of Tribal fishers during peak tribal fishing periods. To assist the government, the Tribes can provide information about Tribal fishery openings and the names of authorized fishers and their vessels. There should be a single government point of contact in each geographic area to foster good communication so that accidental encroachment incidents can be quickly and agreeably resolved.

Response 2. The Coast Guard agrees that communication and coordination between the Tribes, the Coast Guard, and the Navy is vital so that any impact of the rule on Tribal treaty fishing rights can be minimized. The Coast Guard has already had an informative meeting with representatives of the Muckleshoot Tribe, Suquamish Tribe, and the Navy on April 25, 2002. The Coast Guard Thirteenth District plans to continue to facilitate discussions between potentially affected Tribes and the Navy to develop local implementation policies in Puget Sound designed to minimize the possibility of effects on the Tribes, consistent with security concerns.

The Coast Guard believes that the Tribes' recommendation to the Navy to schedule port calls and routine non-emergency vessel movements to avoid impacts on Tribal fishers and fisheries has potential merit, when such actions are consistent with naval vessel and national security. The Coast Guard has received assurances from the Navy that the Navy is willing and able to gather information from the Tribes about fishery dates, locations, and expected number of Tribal vessels and relay this information to naval commanders in the area. The Navy's primary point of contact for gathering this information from the Tribes is the Watch Commander, Regional Operations Center, Navy Region Northwest, who can be reached 24 hours per day at (360) 315-5123.

The Coast Guard is committed to working with the Tribes and agrees that additional discussions with representatives of potentially affected Tribes and the Navy are desirable to establish specific local implementation policies to achieve both security and tribal objectives. Towards that end, the Coast Guard's point of contact is the Coast Guard District Thirteen's Tribal Liaison Office, which can be reached 24 hours per day via the District Command Center at (206) 220-7001.

With regard to the Tribes' concern over accidental encroachment into naval vessel protection zones, the rule does not distinguish between an accidental or intentional violation of the 100-yard exclusionary zone. An accidental violation may result in enforcement action. But the rule is written to encourage those who may need to come within 100 yards of a large naval vessel to request permission from the on-scene Coast Guard personnel, senior naval officer present in command, or official patrol. In most cases, the commanding officer of the naval vessel will be the individual to grant or deny permission to enter the 100-yard exclusionary zone because he or she will be in the best position to assess the security needs of his or her ship. Additional coordination suggestions will be given full consideration during a cooperative process to develop practical local implementation guidelines.

Comment 3. The Tribes stated that for local Coast Guard and Navy personnel to have the flexibility to accommodate the needs of the Tribes, it is important that the final regulation provide direction to local Coast Guard and Navy personnel to implement measures that allow tribal members access to fishing rights. The Tribes recommended the insertion of the following language as a new paragraph (g) to § 165.2030: “The Coast Guard, senior naval officer present in command, or the official patrol shall work with affected tribal governments to provide treaty Indian fishers access to usual and accustomed fishing sites within 100 yards of large U.S. naval vessels.”

Response 3. The Coast Guard believes that adding a new paragraph (g) to § 165.2030 of the rule is not necessary or prudent. The rule already has built-in flexibility for addressing Tribal issues. In those instances where the 100-yard exclusionary zone would exclude Tribal fishers from their usual and accustomed grounds, the rule allows Tribal fishers to request permission to enter the zone by contacting the Coast Guard, senior naval officer present in command or the official patrol on VHF-FM Channel 16. After making an on-scene assessment of the naval vessel's security situation relative to any perceived threat, the Coast Guard, senior naval officer present in command or the official patrol would have the discretion to allow the requestor within 100 yards.

Addition of the language would not be prudent from a security standpoint because the Coast Guard interprets the proposed paragraph (g)'s use of the term “shall” as requiring the on-scene Coast Guard or Navy commander to notify the Tribes every time a large naval vessel transit takes place. The Coast Guard does not believe the rule should require coordination when it is not needed or when it would not be prudent from a security perspective. By employing language in the rule that would limit the on-scene commander's ability to use his or her discretion on a case-by-case basis, naval vessels might become vulnerable to one of the threats that naval vessel protection zones were designed to guard against-small boats intent on attacking naval vessels.

The Coast Guard and the Navy will work with the affected Tribes on measures to implement the rule in a way that will allow the Tribes to reach their objectives to the fullest extent possible while accomplishing naval vessel and national security objectives.

Comment 4. The Office of Hawaiian Affairs commented that existing human use activities such as ocean access and fishing should not be restricted spatially or in duration beyond that which is reasonable to provide for the security concerns of the proposed rule.

Response 4. Because this rule does not restrict ocean activities permanently in any location and because the duration of any restrictions on human use activities would be limited to the time period that a large naval vessel is in transit or is anchored or moored, the Coast Guard believes the effect of this rule on the public is minimized. In addition, the rule has several built-in mitigation measures to limit public impact. Vessels that need to pass within 100 yards of a large U.S. naval vessel may contact the Coast Guard, the senior naval officer present in command, or the official patrol on VHF-FM Channel 16 to obtain the necessary permission. And once security concerns permit, the rule encourages the Coast Guard, senior naval officer present in command, or the official patrol to publicize in advance the movement of the naval vessel.

This rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. It is not “significant” under the regulatory policies and procedures of the Department of Transportation (DOT) (44 FR 11040, February 26, 1979).

We expect the economic impact of this rule to be so minimal that a full Regulatory Evaluation under paragraph 10e of the regulatory policies and procedures of DOT is unnecessary.

Although this regulation will restrict access to some areas and regulate speed in other areas, the effect of this regulation will not be significant because: (1) Individual naval vessel protection zones are limited in size; (2) the Coast Guard, senior naval officer present in command, or official patrol may authorize access to the naval vessel protection zone; (3) the naval vessel protection zone for any given transiting naval vessel will only effect a given geographical location for a limited time; and (4) when conditions permit, the Coast Guard, senior naval officer present in command, or the official patrol should give advance notice of all naval vessel movements on VHF-FM channel 16 so mariners can adjust their plans accordingly. Further, the Coast Guard received no comments related to economic impact following implementation of the temporary final rule.

Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered whether this rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000.

The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

This rule will affect the following entities, some of which may be small entities: the owners or operators of vessels intending to operate near or anchor in the vicinity of U.S. naval vessels in the navigable waters of the United States.

This regulation will not have a significant economic impact on a substantial number of small entities for the following reasons: (1) Individual naval vessel protection zones are limited in size; (2) the official patrol may authorize access to the naval vessel protection zone; (3) the naval vessel protection zone for any given transiting naval vessel will only affect a given geographic location for a limited time; and (4) when conditions permit, the Coast Guard, senior naval officer present in command, or the official patrol should give advance notice of all naval vessel movements on VHF-FM channel 16 so mariners can adjust their plans accordingly.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Public Law 104-121), we offered to assist small entities in understanding the rule so that they can better evaluate its effects on them and participate in the rulemaking.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247).

This rule calls for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this rule under that Order and have determined that it does not have implications for federalism.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.

This rule will not affect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.

This rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.

We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not create an environmental risk to health or risk to safety that may disproportionately affect children.

The Coast Guard received five letters commenting on the proposed rule, three from Indian Tribal Governments in Puget Sound, Washington, one from the Northwest Indian Fisheries Commission and one from the Office of Hawaiian Affairs. They are discussed under “Comments and Responses.” The Coast Guard recognizes the Indian Tribes” rights under the Stevens Treaties. And the Coast Guard is committed to working with the Navy and the Tribal Governments to implement local policies to mitigate the concerns that have been identified. Given the flexibility of the rule to accommodate the special needs of mariners in the vicinity of large naval vessels and the Coast Guard's commitment to working with the Tribes, we have determined that naval vessel security and fishing rights protection need not be incompatible and therefore have determined that this rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it would not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.

We have analyzed this rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. It has not been designated by the Administrator of the Office of Information and Regulatory Affairs as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211.

We have conducted an analysis for this action according to the Coast Guard National Environmental Policy Act Manual, COMDTINST M16475.1D, which guides Coast Guard compliance with the National Environmental Policy Act of 1969 (NEPA) and have concluded that there are no factors present which would limit the use of Coast Guard Categorical Exclusion (34)(g). Comments from the public were considered prior to approval of a final Categorical Exclusion Determination (CED) documenting our decision to exclude this action from further environmental review. Refer to Comments and Changes for a summary of comments received and the Coast Guard's response. Public comments, an environmental checklist and CED for this action are available in the docket where indicated under ADDRESSES.

We did not publish a notice of proposed rulemaking (NPRM) for this regulation. Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing an NPRM and for making the rule effective less than 30 days following publication. An NPRM was considered unnecessary because the fireworks display is a local event that will have minimal impact on the waterway. The zone is only in effect for one hour and vessels can be given permission to transit the zone during all but about 15 minutes of this time. Vessels may transit around the zone at all times. Additionally, vessels would not be precluded from mooring at or getting underway from commercial or recreational piers in the vicinity of the zone.

The Coast Guard is establishing a temporary safety zone in the waters of Long Island Sound off shore of Black Point, CT. This safety zone encompasses all waters of Long Island Sound within an 800-foot radius of approximate position 41°17′50″ N, 072°12′06″ W (NAD 1983). The safety zone is intended to protect boaters from the hazards associated with fireworks launched from a barge in the area. This safety zone covers the minimum area needed and imposes the minimum restrictions necessary to ensure the protection of all vessels.

The safety zone is for a fireworks display in Long Island Sound sponsored by Mr. Wade Thompson. The safety zone will be in effect from 9:30 p.m. to 10:30 p.m. on June 7, 2002. The safety zone encompasses all waters of Long Island Sound within an 800-foot radius of approximate position 41°17′50″ N, 072°12′06″ W (NAD 1983).

Public notifications will be made prior to the event via the Local Notice to Mariners and Marine Information Broadcasts. Marine traffic will be allowed to transit around the safety zone at all times. Vessels will not be precluded from mooring at or getting underway from recreational or commercial piers in the vicinity of the zone. No vessel may enter the safety zone without permission from the Captain of the Port, Long Island Sound.

This rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. It is not “significant” under the regulatory policies and procedures of the Department of Transportation (DOT) (44 FR 11040, February 26, 1979).

The Coast Guard expects the economic impact of this temporary final rule to be so minimal that a full Regulatory Evaluation under paragraph 10(e) of the regulatory policies and procedures of DOT is unnecessary. This finding is based on the minimal time that vessels will be restricted from the zone, the opportunity for vessels to transit around the zone during the event, the ability of vessels to moor at or get underway from commercial or recreational piers in the vicinity of the zone, and the advance notifications that will be made.

The size of this safety zone was determined using National Fire Protection Association and the Captain of the Port Long Island Sound Standing Orders for 8-inch mortars fired from a barge combined with the Coast Guard's knowledge of tide and current conditions in the area.

Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we considered whether this rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000.

The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities. This rule will affect the following entities, some of which may be small entities: the owners or operators of vessels intending to transit or anchor in a portion of Long Island Sound during the times this zone is activated.

This safety zone will not have a significant economic impact on a substantial number of small entities for the following reasons: it is a local event with minimal impact on the waterway, vessels may still transit around the zone during the event, the zone is only in effect for one hour and vessels can be given permission to transit the zone except for all but about 15 minutes during this time. Additionally, vessels will not be precluded from mooring at or getting underway from commercial or recreational piers in the vicinity of the zone. Before the effective period, public notifications will be made via Local Notice to Mariners and Marine Information Broadcasts.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Public Law 104-121), we want to assist small entities in understanding this rule so that they can better evaluate its effects on them and participate in the rulemaking. If the rule will affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact BM2 Ryan Peebles, in the Operations at Coast Guard Group/Marine Safety Office Long Island Sound, CT, at (203) 468-4408.

This rule calls for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

We have analyzed this rule under Executive Order 13132, Federalism, and have determined that this rule does not have implications for federalism under that Order.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) governs the issuance of Federal regulations that require unfunded mandates. An unfunded mandate is a regulation that requires a State, local, or tribal government or the private sector to incur direct costs without the Federal Government's having first provided the funds to pay those unfunded mandate costs. This rule will not impose an unfunded mandate.

This rule will not effect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.

This rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.

We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not concern an environmental risk to health or risk to safety that may disproportionately affect children.

This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments. A rule with tribal implications has a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.

We have analyzed this rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. It has not been designated by the Administrator of the Office of Information and Regulatory Affairs as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211.

The Coast Guard considered the environmental impact of this rule and concluded that under figure 2-1, paragraph 34(g), of Commandant Instruction M16475.1D, this rule is categorically excluded from further environmental documentation. This rule fits paragraph 34(g) as it establishes a safety zone. A “Categorical Exclusion Determination” is available in the docket for inspection or copying where indicated under ADDRESSES.

Throughout this document, “we,” “us” and “our” refer to EPA.

Table 1 lists the rule we are approving with the dates that it was adopted by the local air agency and submitted by the California Air Resources Board (CARB).

On May 7, 2002, this rule submittal was found to meet the completeness criteria in 40 CFR part 51, appendix V, which must be met before formal EPA review.

On December 11, 2000, EPA finalized limited approval and limited disapproval of a previous version of this rule. VCAPCD adopted the revisions to this rule on January 8, 2002, and CARB submitted it to us on March 15, 2002. We are acting on the revised version of this rule.

Rule 74.6 limits surface cleaning and degreasing activities performed with solvents containing VOCs. The TSD has more information about this rule.

Generally, SIP rules must be enforceable (see section 110(a) of the Act), must require Reasonably Available Control Technology (RACT) for major sources in nonattainment areas (see sections 182(a)(2)(A) and 182(f)), and must not relax existing requirements (see sections 110(l) and 193). The VCAPCD regulates an ozone nonattainment area ( see 40 CFR part 81), so Rule 74.6 must fulfill RACT.

Guidance and policy document that we used to define specific enforceability and RACT requirements include the following:

1. Control of Volatile Organic Emissions from Solvent Metal Cleaning (November 1977).

2. Issue Relating to VOC Regulation, Cut Points, Deficiencies, and Deviations (the “Blue Book”), U.S. EPA, May 25, 1988.

3. Determination of Reasonably Available Control Technology and Best Available Control Technology for Organic Solvent Cleaning and Degreasing Operations (July 18, 1991).

We believe this rule is consistent with relevant policy and guidance regarding enforceability and SIP relaxations. The TSD has more information on our evaluation. In particular, the revisions to this rule adequately address the deficiencies identified in our December 11, 2000 limited disapproval.

As authorized in section 110(k)(3) of the Act, EPA is fully approving the submitted rule because we believe it fulfills all relevant requirements. We do not think anyone will object to this approval and we therefore are finalizing it without proposing it in advance. However, in the Proposed Rules section of this Federal Register , we are simultaneously proposing approval of the same submitted rule. If we receive adverse comments by July 5, 2002, we will publish a timely withdrawal in the Federal Register to notify the public that the direct final approval will not take effect, and we will address the comments in a subsequent final action based on the proposal. If we do not receive timely adverse comments, the direct final approval will be effective without further notice on August 5, 2002. This action will incorporate this rule into the federally enforceable SIP.

NO X and VOC help produce ground-level ozone, smog and particulate matter, which harm human health and the environment. Section 110(a) of the CAA requires states to submit regulations that control NO X emissions. Table 2 lists some of the national milestones leading to the submittal of this local agency NO X rule.

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is not a “significant regulatory action” and therefore is not subject to review by the Office of Management and Budget. For this reason, this action is also not subject to Executive Order 32111, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001). This action merely approves state law as meeting federal requirements and imposes no additional requirements beyond those imposed by state law. Accordingly, the Administrator certifies that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). Because this rule approves pre-existing requirements under state law and does not impose any additional enforceable duty beyond that required by state law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Public Law 104-4).

This rule also does not have tribal implications because it will not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000). This action also does not have Federalism implications because it does not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999). This action merely approves the state rules implementing a Federal standard, and does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act. This rule also is not subject to Executive Order 13045, “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), because it is not economically significant.

In reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. In this context, in the absence of a prior existing requirement for the State to use voluntary consensus standards (VCS), EPA has no authority to disapprove a SIP submission for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a SIP submission, to use VCS in place of a SIP submission that otherwise satisfies the provisions of the Clean Air Act. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. This rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

The Congressional Review Act, 5 U.S.C. 801 et seq. , as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register . A major rule cannot take effect until 60 days after it is published in the Federal Register . This action is not a “major rule” as defined by 5 U.S.C. 804(2).

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by August 5, 2002. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)

Copies of this final rule are available electronically from the EPA Internet Web site. This service is free of charge, except for your existing cost of Internet connectivity. An electronic version is made available on the day of publication on the primary Internet site listed below. The EPA Office of Transportation and Air Quality will also publish this final rule on the secondary Web site listed below.

Please note that due to differences between the software used to develop the document and the software into which the document may be downloaded, changes in format, page length, etc. may occur.

Entities potentially regulated by this action are those which produce, import, supply or distribute gasoline. Regulated categories and entities include:

This table is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be regulated by this action. This table lists the types of entities that EPA is now aware could potentially be regulated by this action. Other types of entities not listed in the table could also be regulated. To determine whether your business would have been regulated by this action, you should carefully examine the list of areas covered by the reformulated gasoline program in § 80.70 of Title 40 of the Code of Federal Regulations (CFR). If you have questions regarding the applicability of this action to a particular entity, consult the person listed in the preceding FOR FURTHER INFORMATION CONTACT section.

EPA's reformulated gasoline (RFG) regulations include a list of geographic areas that are covered areas for purposes of the RFG program. 40 CFR 80.70. Section 80.70(j) identifies the nonattainment areas that opted into the RFG program at the beginning of the program. Seven Maine counties opted into the RFG program at that time and are listed in § 80.70(j)(5). Section 80.70(l) provides that, upon the effective date for removal under § 80.72(a), a geographic area that has opted out of the RFG program shall no longer be considered a covered area.

On March 5, 1999, EPA approved an opt-out petition submitted by the Governor of Maine, and the seven Maine counties of Androscoggin; Cumberland; Kennebec; Knox; Lincoln; Sagadahoc; and York were removed from the RFG program effective March 10, 1999. 1 With today's direct final rule, EPA is amending § 80.70(j)(5) of EPA's RFG regulations by removing the seven listed Maine counties to reflect that they are no longer covered areas in the federal RFG program.

Under Clean Air Act section 211(k)(10)(D), any ozone nonattainment area that is reclassified as a Severe ozone nonattainment area becomes an RFG covered area effective one year after its reclassification. 42 U.S.C. 7545(k)(10)(D).

Effective June 1, 1995, the Sacramento, California, ozone nonattainment area was reclassified from a Serious to a Severe ozone nonattainment area. 60 FR 20237 (April 25, 1995). The Sacramento ozone nonattainment area, therefore, became an RFG covered area as of June 1, 1996.

Effective December 10, 2001, the San Joaquin Valley, California, ozone nonattainment area was reclassified from a Serious to a Severe ozone nonattainment area. 2 The San Joaquin Valley ozone nonattainment area, therefore, will become an RFG covered area as of December 10, 2002.

In today's direct final rule, EPA is amending § 80.70 to reflect that the Sacramento nonattainment area became a covered area in the federal RFG program by operation of law on June 1, 1996 and that the San Joaquin Valley nonattainment area will become a covered area in the federal RFG program by operation of law on December 10, 2002. 3 These amendments, in combination with the amendment described in Section I above, will bring the regulations into conformity with the existing status of “covered areas” in the RFG program.

Section 80.70(k) of the RFG rule as originally promulgated provided that any area classified as a Marginal, Moderate, Serious, or Severe ozone nonattainment area may be included as an RFG covered area (i.e, “opt-in”) upon petition of the governor of the state in which the area is located. 4 EPA subsequently modified this language to provide that any area “currently or previously designated as a nonattainment area for ozone” may be included as an RFG covered area. 63 FR 52094 (September 29, 1998). This modification was subsequently challenged in the United States Court of Appeals for the District of Columbia Circuit, which found that EPA lacked authority to promulgate this modification. American Petroleum Institute v. EPA. , 198 F.3d 275 (D.C. Cir. 2000). Therefore, with today's direct final rule, EPA is amending § 80.70 to remove the text which extended the opt-in provisions and reinstate the language of this section as originally promulgated.

Today's rule revises the introductory text of § 80.70(j) to distinguish the nonattainment areas that have opted into the RFG program from those that are required to be in the program under the Clean Air Act. In addition, today's rule revises the text of sections 80.70(l) and (n) to make these provisions clearer. These minor revisions are strictly organizational and do not change the substance or intent of these provisions in any way. Today's rule also removes the current provisions of § 80.70(m) relating to Phoenix as an opt-in covered area, since the Phoenix area is no longer a covered area as of June 10, 1998. 5 The provisions for the Sacramento and San Joaquin Valley covered areas, described above, are included in a new § 80.70(m).

EPA is publishing this action without prior proposal because the Agency views this as a noncontroversial amendment and anticipates no adverse comments. This rule will be effective August 5, 2002, without further notice unless the Agency receives adverse comments by July 5, 2002. If EPA receives substantive adverse comments on this action, we will publish in the Federal Register a timely withdrawal of the direct final rule informing the public that this direct final rule will not take effect. EPA considers each element of today's direct final rule to be independent and severable, therefore, if we receive adverse comment we will withdraw only those elements (an amendment, section or paragraph) of this action that are addressed by such comments.

EPA is publishing separately, in the “Proposed Rules” section of today's Federal Register , a notice of proposed rulemaking that incorporates each of the regulatory amendments included in this direct final rule. In the event that EPA receives adverse comment on all or part of this direct final rule, we will proceed according to ordinary notice and comment rulemaking procedures. We will address all adverse public comments in a subsequent final rule based on the proposed rule. EPA will not institute a second comment period on this rule. Any parties interested in commenting on this rule should do so at this time.

Today's amendments to the CFR reflect changes that have occurred in separate actions in accordance with EPA's regulations and the CAA. This rule is not itself an approval of Maine's or Arizona's opt-out request—Agency action approving those petitions occurred earlier in separate administrative proceedings. Similarly, neither the reclassification of the Sacramento and San Joaquin Valley nonattainment areas, nor the self-executing change in status of these areas to RFG “covered areas,” are dependent on today's action. EPA is simply modifying the list of covered areas in the RFG regulations, 40 CFR 80.70, so the list will reflect EPA's earlier approval of the Maine and Arizona opt-out requests, and the self-executing change in the status of the Sacramento and San Joaquin Valley nonattainment areas. Thus, the various elements of today's direct final rule involve little or no exercise of agency discretion. Rather today's actions essentially are ministerial regulatory amendments.

Under Executive Order 12866 (58 FR 51735 (Oct. 4, 1993), the Agency must determine whether the regulatory action is “significant” and therefore subject to OMB review and the requirements of the Executive Order. The Order defines “significant regulatory action” as one that is likely to result in a rule that may:

(1) Have an annual effect on the economy of $100 million or more, or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities;

(2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency;

(3) Materially alter the budgetary impact of entitlement, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or

(4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order.

It has been determined that this rule is not a “significant regulatory action” under the terms of Executive Order 12866 and is therefore not subject to OMB review.

This action does not impose any new information collection burden. Today's rule merely amends EPA's regulations to reflect the current status of covered areas within the RFG program. These various changes in status are not dependant on today's rulemaking, but have occurred (or will occur) as the result of separate agency action and self-executing statutory provisions. However, the Office of Management and Budget (OMB) has previously approved the information collection requirements contained in the existing [ RFG ] regulations [CFR citation— 40 CFR part 80, Subparts D, E an F, ] under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. and has assigned OMB control number 2060-0277 (EPA ICR No. 1591.13).

Copies of the ICR document(s) may be obtained from Sandy Farmer, by mail at the Office of Environmental Information, Collection Strategies Division; U.S. Environmental Protection Agency (2822); 1200 Pennsylvania Ave., NW, Washington, DC 20460, by e-mail at farmer.sandy@epa.gov, or by calling (202) 260-2740. A copy may also be downloaded off the internet at http://www.epa.gov/icr. Include the ICR and / or OMB number in any correspondence.

Burden means the total time, effort, or financial resources expended by persons to generate, maintain, retain, or disclose or provide information to or for a Federal agency. This includes the time needed to review instructions; develop, acquire, install, and utilize technology and systems for the purposes of collecting, validating, and verifying information, processing and maintaining information, and disclosing and providing information; adjust the existing ways to comply with any previously applicable instructions and requirements; train personnel to be able to respond to a collection of information; search data sources; complete and review the collection of information; and transmit or otherwise disclose the information.

An Agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. The OMB control numbers for EPA's regulations are listed in 40 CFR part 9 and 48 CFR chapter 15.

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law 104-4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. Under section 202 of the UMRA, EPA generally must prepare a written statement, including a cost-benefit analysis, for proposed and final rules with “Federal mandates” that may result in expenditures to State, local, and tribal governments, in the aggregate, or to the private sector of $100 million or more in any one year. Before promulgating an EPA rule for which a written statement is needed, section 205 of the UMRA generally requires EPA to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, most cost-effective or least burdensome alternative that achieves the objectives of the rule. The provisions of section 205 do not apply when they are inconsistent with applicable law. Moreover, section 205 allows EPA to adopt an alternative other than the least costly, most cost-effective or least burdensome alternative if the Administrator publishes with the final rule an explanation why that alternative was not adopted. Before EPA establishes any regulatory requirements that may significantly or uniquely affect small governments, including tribal governments, it must have developed under section 203 of the UMRA a small government agency plan. The plan must provide for notifying affected small governments, enabling officials of affected small governments to have meaningful and timely input in the development of EPA regulatory proposals with significant Federal intergovernmental mandates, and informing, educating, and advising small governments on compliance with the regulatory requirements.

EPA has determined that this rule does not contain a Federal mandate that may result in expenditures of $100 million or more for State, local, and tribal governments, in the aggregate, or the private sector in any one year. Today's rule, therefore, is not subject to the requirements of sections 202 and 205 of the UMRA.

Executive Order 13045, “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, Apr. 23, 1997) applies to any rule that: (1) Is determined to be “economically significant” as defined under Executive Order 12866, and (2) concerns an environmental health or safety risk that EPA has reason to believe may have a disproportionate effect on children. If the regulatory action meets both criteria, the Agency must evaluate the environmental health or safety effects of the planned rule on children, and explain why the planned regulation is preferable to other potentially effective and reasonably feasible alternatives considered by the Agency.

EPA interprets Executive Order 13045 as applying only to those regulatory actions that are based on health or safety risks, such that the analysis required under section 5-501 of the Order has the potential to influence the regulation. This final rule is not subject to Executive Order 13045 because it does not establish an environmental standard intended to mitigate health or safety risks.

Executive Order 13132, entitled “Federalism” (64 FR 43255, Aug. 10, 1999), requires EPA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” is defined in the Executive Order to include regulations that have “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.”

This rule does not have federalism implications. It will not have substantial direct effects on the States, on the relationship between the national government and the States or on the distribution of power and responsibilities among the various levels of government as specified in Executive Order 13132. This final rule simply makes several minor modifications in the regulations to reflect changes in the covered areas for the federal RFG program, and to delete obsolete language and clarify existing language in the provisions listing the federal RFG covered areas. Thus, Executive Order 13132 does not apply to this rule.

Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (“NTTAA”), Pub L. No. 104-113, section 12(d) (15 U.S.C. 272 note) directs EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards ( e.g., materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies. The NTTAA directs EPA to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable voluntary consensus standards.

This action does not involve technical standards. This final rule simply makes several minor modifications in the regulations to reflect changes in the covered areas for the federal RFG program, and to delete obsolete language and clarify existing language in the provisions listing the federal RFG covered areas. Therefore, EPA did not consider the use of any voluntary consensus standards.

The Congressional Review Act, 5 U.S.C. 801 et seq. , as added by the Small Business regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register . A “major rule” cannot take effect until 60 days after it is published in the Federal Register . This action is not a “major rule” as defined by 5 U.S.C. 804(a).

EPA has determined that it is not necessary to prepare a regulatory flexibility analysis in connection with this final rule. EPA has also determined that this rule will not have a significant economic impact on a substantial number of small entities. For purposes of assessing the impact of today's rule on small entities, small entities are defined as: (1) A firm having no more than 1,500 employees and no more than 75,000 barrels per day capacity of petroleum-based inputs, including crude oil or bona fide feedstocks;  6 according to Small Business Administration (SBA) size standards established under the North American Industry Classification System (NAICS); (2) a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and (3) a small organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.

After considering the economic impacts of today's final rule on small entities, EPA has concluded that this action will not have a significant economic impact on a substantial number of small entities. This final rule will not impose any requirements on small entities. Today's rule revises the introductory text of § 80.70(j) to distinguish the nonattainment areas that have opted into the RFG program from those that are required to be in the program under the Clean Air Act. In addition, today's rule revises the text of § 80.70(l) and (n) to make these provisions clearer. These minor revisions are strictly organizational and do not change the substance or intent of these provisions in any way. Today's rule also removes the current provisions of § 80.70(m) relating to Phoenix as an opt-in covered area, since the Phoenix area is no longer a covered area as of June 10, 1998. Published on August 11, 1998, in the Federal Register (at 63 FR 43044) is a public announcement of EPA's approval of the Arizona Governor's petition and the effective date of the Phoenix opt-out. The opt-out effective date for the Phoenix area was June 10, 1998. The provisions for the Sacramento and San Joaquin Valley covered areas, described above, are included in a new § 80.70(m).

Today's amendments to the CFR reflect changes that have occurred in separate actions in accordance with EPA's regulations and the CAA. This rule is not itself an approval of Maine's or Arizona's opt-out request—Agency action approving those petitions occurred earlier in separate administrative proceedings. Similarly, neither the reclassification of the Sacramento and San Joaquin Valley nonattainment areas, nor the self-executing change in status of these areas to RFG “covered areas,” are dependent on today's action. EPA is simply modifying the list of covered areas in the RFG regulations, 40 CFR 80.70, so the list will reflect EPA's earlier approval of the Maine and Arizona opt-out requests, and the self-executing change in the status of the Sacramento and San Joaquin Valley nonattainment areas. Thus, the various elements of today's direct final rule involve little or no exercise of agency discretion. Rather today's actions essentially are ministerial regulatory amendments.

Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, Nov. 6, 2000), requires EPA to develop an accountable process to ensure “meaningful and timely input by tribal officials in the development of regulatory policies that have tribal implications.” “Policies that have tribal implications” is defined in the Executive Order to include regulations that have “substantial direct effects on one or more Indian tribes, on the relationship between the Federal government and the Indian tribes, or on the distribution of power and responsibilities between the Federal government and Indian tribes.”

Today's rule does not have tribal implications and will not have substantial direct effects on tribal governments, on the relationship between the Federal government and Indian tribes, or on the distribution of power and responsibilities between the Federal government and Indian tribes, as specified in Executive Order 13175. This final rule simply makes several minor modifications in the regulations to reflect changes in the covered areas for the federal RFG program, and to delete obsolete language and clarify existing language in the provisions listing the federal RFG covered areas. Thus, Executive Order 13175 does not apply to this rule.

This rule is not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355 (May 22, 2001)) because it is not a significant regulatory action under Executive Order 12866.

The Statutory authority for the action today is granted to EPA by sections 211(c) and (k), 301, and 307 of the Clean Air Act, as amended; 42 U.S.C. 7545(c) and (k), 7601, 7607; and 5 U.S.C. 553(b).

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by August 5, 2002. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)

Motor vehicle waste disposal wells typically are septic systems or dry wells that can receive or have received waste fluids from floor drains or shop sinks in public or private facilities that service cars, trucks, buses, aircraft, boats, trains, snowmobiles, construction and farm machinery, or other motor vehicles.

Today's decision applies to every motor vehicle waste disposal well that became operational or for which construction had begun by April 5, 2000, if that well is (1) anywhere in Colorado, Montana, or South Dakota, in Indian country or not, or (2) in Indian country in North Dakota, Utah, or Wyoming.

Today's decision does not apply to wells for which construction began after April 5, 2000. Since that date, new or converted motor vehicle waste disposal wells have been prohibited (unless construction began before that date). See the Background section below for more details.

Under the authority of part C of the Safe Drinking Water Act (SDWA), 42 U.S.C. 300h et seq. , the United States Environmental Protection Agency (“EPA”) regulates underground injection of fluids into wells. The purpose of EPA's UIC program is to prevent underground injection that may contaminate underground sources of drinking water (USDW). (42 U.S.C. 300h(b) and (d).) A “USDW” is an aquifer, or its portion, that has not been found by the EPA to be an “exempted aquifer” and that (1) supplies any public water system, or (2) contains a sufficient quantity of ground water to supply a public water system and either currently supplies drinking water for human consumption or contains fewer than 10,000 milligrams per liter (mg/l) of dissolved solids. (40 CFR 144.3.)

There are five classes of injection wells. Motor vehicle waste disposal wells are considered Class V wells. (40 CFR 144.80, 144.81, and 146.5.) All owners or operators of Class V wells must comply with various requirements, including submission of inventory information to State or EPA regulatory agencies prior to operating any Class V well. (See 40 CFR part 144, especially §§ 144.26 and 144.83.)

UIC programs are administered either by EPA or by states whose UIC programs EPA has approved. In Region 8, EPA has authorized North Dakota, Utah, and Wyoming to administer Class V UIC programs. For Indian country in these three states, however, EPA directly administers the Class V UIC program. EPA also directly administers the Class V UIC program throughout Colorado, Montana, South Dakota ( i.e., in both Indian country and elsewhere).

On December 7, 1999, EPA revised its regulations for Class V wells. (64 FR 68546.) Effective April 5, 2000, all new motor vehicle waste disposal wells were prohibited. (40 CFR 144.88(a)(2).) Motor vehicle waste disposal wells already in operation or under construction by that date are to be closed or permitted, with the final deadlines for closure or permit applications depending on a determination of the susceptibility of the nearby groundwater to contamination. (40 CFR 144.87 and 144.88(b).)

The areas with greatest priority for protection are known as “Ground Water Protection Areas” or “GWPAs.” States are required to delineate and assess GWPAs. ( See section 1453 of the SDWA and 40 CFR 144.86.) An example of a GWPA is a recharge area of an aquifer that serves a “community” or “non-transient non-community” public water supply system. ( See 40 CFR 144.86.) Any motor vehicle waste disposal well in a GWPA must either close or be covered by a permit application within one year of the state's completion of a local source water assessment, with certain allowances for extensions relating to the timing of the state delineation and assessment. ( See 40 CFR 144.87(b) and 144.88(b)(1)(i) and (v).)

States and the EPA may also identify other areas where groundwater protection is important. These additional areas are known as “Other Sensitive Ground Water Areas” or “OSGWAs.” Any motor vehicle waste disposal well in any designated OSGWA must either close or be covered by a permit application no later than January 1, 2007, again with certain allowances for extensions. ( See 40 CFR 144.86(g), 144.87(c), and 144.88(b)(1)(ii) and (vi).)

States and the EPA are not required to designate “OSGWAs.” If no OSGWAs are designated in a particular state, then all motor vehicle waste disposal wells in that state are to close or be covered by a permit application no later than January 1, 2007 (or the extended deadline, if any). (40 CFR 144.87(f).) If, however, some areas are designated as OSGWAs and others are not, then only those wells within OSGWAs are subject to this particular deadline.

The purpose of this document is to announce that EPA Region 8 has decided not to designate any OSGWAs. The consequence of this decision is that no later than January 1, 2007, each motor vehicle waste disposal well that is in Colorado, Montana, or South Dakota (regardless of whether it is in Indian country) or that is in Indian country in North Dakota, Utah, or Wyoming must close or be covered by either a permit or permit application.

If EPA Region 8 had decided to designate any OSGWA(s), then any motor vehicle waste disposal well outside of the designated OSGWA(s) would not have been subject to the final January 1, 2007 deadline.

There is no provision in EPA's regulations for extending the January 1, 2007 deadline in jurisdictions where EPA directly administers the Class V UIC program. The extension provisions apply only to state-administered programs, as described in 40 CFR 144.87(c). Consequently, the January 1, 2007 deadline is a final deadline.

To obtain a permit to operate a motor vehicle waste disposal well, an owner or operator must demonstrate, among other things, that the well's waste stream does not contain contaminants in concentrations greater than the Maximum Contaminant Levels (MCLs) established in 40 CFR part 141 or Health Advisory Limits. A Health Advisory Limit (HAL) is an estimate of an acceptable drinking water level for a chemical substance based on health effects information. HALs can be used by UIC programs to establish enforceable limits for contaminants for which no primacy MCL has been established. HAL information can be obtained from EPA at the address given above in the section entitled FOR FURTHER INFORMATION CONTACT.

Permits usually require owners or operators of motor vehicle waste disposal wells to sample and analyze their waste streams on a quarterly basis. If a well's owner or operator does not obtain a permit for authorization to inject, then the well must be closed in a manner that cannot allow any waste fluids to be released into the ground, with thirty days' advance notice to Region 8 of the closure. (40 CFR 144.88(b)(1)(vii).) More details on the permit application process are available from EPA upon request. (Please see the preceding section entitled For Further Information Contact .)

In some cases, motor vehicle waste disposal well owners or operators may be required to close their wells or apply for permits before January 1, 2007. For example, if a Class V well is in a designated GWPA, it must be closed or covered by a permit application within one year of the completion of a source water assessment, as mentioned above. As another example, if EPA finds that a well may cause a violation of a National Primary Drinking Water Regulation at 40 CFR part 141 or may be otherwise adversely affecting the health of persons, then EPA may require the owner or operator of the well to apply for a permit application or to close the well by a date to be specified by Region 8. ( See 40 CFR 144.12(c) and (d).) Under no circumstance would a well's location in a GWPA or an OSGWA (had Region 8 decided to designate any) postpone a more immediate closure/permit application deadline specified by Region 8.

EPA Region 8 has made extensive efforts to educate and consult with the public, including Indian tribes, concerning the requirements for motor vehicle waste disposal wells and Region 8's options for designating OSGWAs. The Region's efforts are summarized below. The following does not include owner/operator-specific compliance assistance, inspections, enforcement actions, and other efforts that also have served to disseminate information about the new requirements.

March, 2000: Region 8 directly mailed information on the new/existing Class V requirements to sanitarians affiliated with all county health departments in Colorado. County sanitarians are responsible for ensuring that on-site waste water ( e.g. , septic) systems in their jurisdiction are constructed and used properly.

April, 2000: At the Spring Sanitarians' Educational Conference in Helena, Montana, Region 8 presented a summary of the new/existing Class V requirements.

April, 2000: Region 8 staff presented a summary of the new/existing Class V requirements to the Montana Department of Environmental Quality (DEQ) in Helena, Montana. The DEQ is responsible for implementing the source water assessment program and other ground water protection programs within Montana.

July, 2000: Region 8 presented a summary of the new/existing Class V requirements at the National Environmental Health Association's Annual Education Conference in Denver, Colorado. This conference drew sanitarians from Region 8 and other parts of the country.

August, 2000: Region 8 discussed the new Class V requirements with representatives from the Colorado Department of Public Health and Environment (DPH&E) and Montana DEQ, during the State UIC/Source Water Directors' Meeting in Glenwood Springs, Colorado.

October, 2000: Region 8 discussed the new Class V requirements with representatives of the South Dakota Department of Environment and Natural Resources (DENR) in Pierre, South Dakota. The DENR is responsible for implementing the source water assessment program and other ground water protection programs within South Dakota.

March, 2001: Region 8 sent a letter to all Tribal Chairpersons and Tribal Environmental Program Directors in Indian country in Region 8 describing Region 8's implementation options. The letter included a draft proposal for applying the closure/permitting requirements throughout all Indian country in Region 8.

April, 2001: Region 8 invited potential stakeholders (including motor vehicle-related industry groups) in South Dakota to participate in upcoming workshops on the new/existing Class V requirements. The invitation letter described Region 8's draft proposal to apply the closure/permitting requirements throughout South Dakota.

May, 2001: In Rapid City and Huron, South Dakota, Region 8 presented a summary of the new/existing Class V requirements to federal, state, county, municipal, nonprofit, and private citizen stakeholders. Region 8 described its implementation options and its draft proposal to apply the closure/permitting requirements throughout South Dakota. It also received comments from the public on the draft proposal.

July, 2001: In Fort Yates, North Dakota, Region 8 presented a summary of the new/existing Class V requirements to Tribal Environmental Program Directors attending a Regional Operations Committee meeting, describing Region 8's implementation options and its draft proposal for applying the closure/permitting requirements throughout Indian country in Region 8.

September/October, 2001: Region 8 published a notice announcing its proposal for implementing the motor vehicle waste disposal well permitting/closure requirements on a state and Indian countrywide basis, as described below.

October, 2001: Region 8 discussed the new Class V requirements with representatives from the Colorado DPH&E, Montana DEQ, and the South Dakota DENR during the State UIC/Source Water Directors Meeting held in Lead, South Dakota.

October, 2001: Region 8 presented a summary of the new/existing Class V requirements and Region 8's previously-published formal proposal in Helena, Montana, to General Motors' automobile facility dealerships in Montana.

In late September and early October of 2001, Region 8 formally announced that it was proposing to implement the 1999 Class V requirements throughout Colorado, Montana, and South Dakota, and only in Indian country in the other three Region 8 states ( i.e. , North Dakota, Utah, and Wyoming). Region 8 made its announcement by publishing a two-page notice in nineteen newspapers throughout Region 8. It also mailed this notice directly to over 300 potential stakeholders in the Region and posted it on Region 8's Web site.

In this notice, Region 8 made a finding that motor vehicle waste disposal wells are located predominately in unsewered areas with permeable soils, where local populations depend on ground water as a source of drinking water or could do so in the future. Region 8 also found that for wells located in areas with more impermeable soils, motor vehicle wastes ( e.g. , solvents) can migrate downward through natural ( e.g. , fractures) and artificial ( e.g. , abandoned wells) pathways and indirectly contaminate USDWs. Therefore, Region 8 proposed implementing a closure/permitting requirement throughout the area in which it directly implements the Class V program as the most prudent and equitable way to achieve its regulatory goal of protecting all USDWs for current and future uses.

Neither the Safe Drinking Water Act nor any EPA regulation requires Region 8 to publish a formal notification of its proposed or final decision not to delineate OSGWAs. If Region 8 does not designate any OSGWAs by January 1, 2004, then the “default” closure/permit application deadline is January 1, 2007. ( See 40 CFR 144.87(c).) Thus, as of January 1, 2004, any member of the regulated community could have learned of the January 1, 2007 deadline by finding out that as of that date Region 8 had designated no OSGWAs. Region 8 has chosen, however, not to let the regulated community wait in this manner. Today's document is intended to publicize and clarify well in advance of the January 1, 2007 deadline that motor vehicle waste disposal wells in areas where Region 8 directly implements the Class V UIC program will need to be closed or covered by permit applications by that time. Region 8 is also taking this opportunity to reiterate its ongoing concerns with disposal of motor vehicle waste fluids. The Region will continue to use its authority under 40 CFR 144.12(c) and (d) to take any appropriate action (including requiring permit applications or well closure, as well as to take an enforcement action) upon finding that any Class V well may cause a violation of a National Primary Drinking Water Regulation or otherwise adversely affect public health.

In the public notice described above, EPA Region 8 asked any interested member of the public to submit written comments within 30 days. Approximately 20 persons responded by the end of the comment period, speaking at the meetings described above and/or sending letters or electronic correspondence to EPA. The substantive comments that Region 8 interprets as objections to its proposal are summarized below, along with the Region's responses.

Comment: Some USDWs are not at risk from motor vehicle disposal well-related contamination, while others are. There are areas where the ground water is not located near the land surface and/or is underlain by soil and rock formations ( e.g., clays and shales) that prevent the downward migration of motor vehicle-related waste fluids into an underlying USDW. Region 8 should delineate OSGWAs only where USDWs are relatively shallow and not overlain by an impermeable formation.

Response: Due to hydrogeologic variability, some USDWs are more vulnerable than others. However, deeper, more confined USDWs are at some risk from motor vehicle disposal well-related contamination. Natural ( e.g., fractures) and artificial ( e.g., abandoned wells) pathways in soil and rock formations, including clays and shales, can facilitate the downward migration of contaminants. This is particularly true for certain chemicals ( e.g., solvents), which are heavier than water and routinely used in motor vehicle-related operations.

In addition to large, well-defined shallow aquifer systems, there are less well-defined shallow aquifer systems that have been or could be used extensively in rural areas for drinking water. While often very limited in areal extent, these aquifers constitute USDWs based on their quality ( i.e., less than 10,000 mg/l total dissolved solids) and quantity ( i.e., sufficient to supply a public water system, which Region 8's UIC program generally interprets as an aquifer yielding two or more gallons of water per minute). These USDWs include: (1) Fractured rock ( e.g., granite, shale, and limestone) aquifers; (2) alluvial sand and gravel aquifers adjacent to small drainages; and (3) limited sand lenses within confining ( e.g., shale) formations. While there may be economic or other reasons for these USDWs not to be used for supplying public water systems, it is prudent and in keeping with the purposes of the SDWA for EPA to protect them as drinking water sources for future users and for those who now use existing private wells.

Therefore, Region 8 has concluded that the 1999 Class V requirements affecting existing motor vehicle waste disposal wells should not be restricted to certain geographic areas.

Comment: The proposal would place an economic burden on owners/operators of existing motor vehicle waste disposal wells in rural areas where USDWs are not susceptible to contamination. For example, if an owner or operator installs a holding tank to capture motor vehicle-related wastes, there may be a high price for disposing of these wastes properly, because the nearest facility accepting the waste may be many miles away. As a result, some of these owners/operators could be forced out of business.

Response: Applying the new permitting/closure requirements regardless of facility location should not impose an unreasonable economic burden on owners/operators of motor vehicle waste disposal wells. Having overseen the closure of hundreds of existing motor vehicle waste disposal wells in urban and rural areas over the past 15 years, Region 8 has found that owners/operators have been able to find affordable, alternative methods for managing and disposing of their motor vehicle-related wastes.

Rural facilities often have limited options because the greater distances to a sewer line make connection to a municipal system expensive. However, many motor vehicle-related facilities in rural areas are allowed to discharge into municipal sewer systems, and Region 8 has found that owners/operators are able to afford the costs associated with capturing, pumping, and transporting their wastes to these locally-available systems. These costs also have been affordable due to the small amounts of waste (from occasional drips, leaks, and spills) generated from typical motor vehicle-related operations. In the few instances where larger facilities were found to be generating significant volumes of motor vehicle-related fluid wastes, owners/operators have recycled their wastes or obtained permits requiring injection at levels that would not compromise drinking water standards.

Comment: Committing resources to address existing motor vehicle waste disposal wells in areas where no USDWs are at risk from contamination is not a good use of taxpayers' money. Designating OSGWAs would focus resources on USDWs most susceptible to contamination.

Response: First, in order to designate OSGWAs, Region 8 would need to expend considerable resources to develop a delineation methodology and conduct delineations to support implementation and possible enforcement on a site-by-site basis. Rather than conduct a technically complex and legally defensible exercise, Region 8 believes the idea of designating OSGWAs can be put into practice more efficiently by targeting resources in areas overlying the most vulnerable USDWs. Second, having found over the past 15 years that the majority of motor vehicle waste disposal wells are located in populated areas, where local communities depend on accessible (and vulnerable) ground water as a source of drinking water, Region 8 has made these areas its primary focus for implementation in order to achieve the greatest level of risk reduction with its limited resources.

Having reviewed all comments received during the public comment period, Region 8 has concluded that no new or compelling information was received to justify substantive changes to its implementation proposal. Therefore, Region 8 has decided to apply the closure/permitting requirements of the December 7, 1999 revisions to all motor vehicle waste disposal wells throughout the States of Colorado, Montana, and South Dakota (regardless of whether they are in Indian country), and throughout Indian country within North Dakota, Utah, and Wyoming.

In making its final decision, Region 8 considered the following additional factors:

Consistency in Implementation: Nationally, almost all State/EPA UIC programs intend to apply the new Class V requirements state and Indian country-wide. The remaining UIC programs nonetheless expect that all motor vehicle waste disposal wells will be either closed or permitted.

Possible Delay of Source Water Assessment Completion: EPA's 1999 rule states that if all four steps ( i.e., inventory, delineation, susceptibility analysis, and public notification) of the assessment process for all applicable public water systems (PWSs) are not completed by a state or tribe by January 1, 2004, the new requirements affecting existing motor vehicle waste disposal wells will apply throughout the relevant state or area of Indian country, absent a formal request for a one-year extension. (40 CFR 144.87(b).) Based on feedback Region 8 has received from state and tribal source water program contacts, it is unlikely that assessments will be completed for all PWSs affected by this rule. This is particularly true in Indian country because tribes are not required to complete this work under the SDWA. Therefore, Region 8 expects that the new requirements will most likely apply across all Region 8 states and areas of Indian country, consistent with today's decision.

Reduced Owner/Operator Liability: EPA and State UIC program inspections and environmental audits conducted by property owners, lenders, and insurers have identified motor vehicle waste disposal wells as an unnecessary and long-term environmental liability. The costs of soil and ground water cleanup have far exceeded the preventive costs of adopting alternatives such as sewer connections, holding tanks, and dry shops. Today's decision will encourage these alternative, more environmentally sound means of managing and disposing of motor vehicle waste fluids.

You may be affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. Potentially affected categories and entities may include, but are not limited to:

This listing is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be affected by this action. Other types of entities not listed in the table could also be affected. The North American Industrial Classification System (NAICS) codes have been provided to assist you and others in determining whether or not this action might apply to certain entities. If you have questions regarding the applicability of this action to a particular entity, consult the person listed under FOR FURTHER INFORMATION CONTACT .

1. Electronically .You may obtain electronic copies of this document, and certain other related documents that might be available electronically, from the EPA Internet Home Page at http://www.epa.gov/. To access this document, on the Home Page select “Laws and Regulations,” “Regulations and Proposed Rules,” and then look up the entry for this document under the “ Federal Register —Environmental Documents.” You can also go directly to the Federal Register listings at http://www.epa.gov/fedrgstr/. A frequently updated electronic version of 40 CFR part 180 is available at http://www.access.gpo.gov/nara/cfr/cfrhtml_00/Title_40/40cfr180_00.html, a beta site currently under development. To access the OPPTS Harmonized Guidelines referenced in this document, go directly to the guidelines at http://www.epa.gov/opptsfrs/home/guidelin.htm.

2. In person . The Agency has established an official record for this action under docket ID number OPP-2002-0087. The official record consists of the documents specifically referenced in this action, and other information related to this action, including any information claimed as Confidential Business Information (CBI). This official record includes the documents that are physically located in the docket, as well as the documents that are referenced in those documents. The public version of the official record does not include any information claimed as CBI. The public version of the official record, which includes printed, paper versions of any electronic comments submitted during an applicable comment period is available for inspection in the Public Information and Records Integrity Branch (PIRIB), Rm. 119, Crystal Mall #2, 1921 Jefferson Davis Hwy., Arlington, VA, from 8:30 a.m. to 4 p.m., Monday through Friday, excluding legal holidays. The PIRIB telephone number is (703) 305-5805.

In the Federal Register of April 25, 2001 (66 FR 20808) (FRL-6774-7), EPA issued a notice pursuant to section 408 of the Federal Food, Drug, and Cosmetic Act (FFDCA), 21 U.S.C. 346a, as amended by the Food Quality Protection Act of 1996 (FQPA) (Public Law 104- 170), announcing the filing of a pesticide petition (PP 0F6089) by Dow AgroSciences, LLC, 9330 Zionsville Road, Indianapolis, IN 46268. This notice included a summary of the petition prepared by Dow AgroSciences, LLC, the registrant. There were no comments received in response to the notice of filing.

The petition requested that 40 CFR part 180 be amended by establishing tolerances for combined residues of the herbicide cyhalofop-butyl (cyhalofop-butyl, cyhalofop-acid and cyhalofop-diacid) in or on rice grain, rice hull, rice bran and polished rice at 0.03 parts per million (ppm) and rice straw at 8.0 ppm.

Section 408(b)(2)(A)(i) of the FFDCA allows EPA to establish a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the tolerance is “safe.” Section 408(b)(2)(A)(ii) defines “safe” to mean that “there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.” This includes exposure through drinking water and in residential settings, but does not include occupational exposure. Section 408(b)(2)(C) requires EPA to give special consideration to exposure of infants and children to the pesticide chemical residue in establishing a tolerance and to “ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide chemical residue....”

EPA performs a number of analyses to determine the risks from aggregate exposure to pesticide residues. For further discussion of the regulatory requirements of section 408 and a complete description of the risk assessment process, see the final rule on Bifenthrin Pesticide Tolerances (62 FR 62961, November 26, 1997) (FRL-5754-7).

Consistent with section 408(b)(2)(D), EPA has reviewed the available scientific data and other relevant information in support of this action. EPA has sufficient data to assess the hazards of and to make a determination on aggregate exposure, consistent with section 408(b)(2), for a tolerance for combined residues of cyhalofop (cyhalofop-butyl plus cyhalofop acid) and the di-acid metabolite in or on rice grain at 0.03 ppm and rice straw at 8.0 ppm. Tolerances are not required for rice processed fractions or for animal commodities. EPA's assessment of exposures and risks associated with establishing the tolerance follows.

EPA has evaluated the available toxicity data and considered its validity, completeness, and reliability as well as the relationship of the results of the studies to human risk. EPA has also considered available information concerning the variability of the sensitivities of major identifiable subgroups of consumers, including infants and children. The nature of the toxic effects caused by cyhalofop-butyl are discussed in the following Table 1 and Table 2 as well as the no observed adverse effect level (NOAEL) and the lowest observed adverse effect level (LOAEL) from the toxicity studies reviewed.

The January 22, 2002 Corrective Action Management Units (CAMU) amendments rule promulgated amendments to the regulations governing CAMUs. These amendments were promulgated under HSWA statutory authority and are generally more stringent than the previous CAMU regulations, published on February 16, 1993 (58 FR 8658). Thus, in states that are authorized for the 1993 CAMU rule, there was the potential for dual implementation of the CAMU regulations by EPA and states authorized for the 1993 rule if these states are not authorized for the amendments before they become effective.

To avoid this potential disruption in the implementation of the RCRA cleanup program caused by the regulatory authority for CAMUs being split between states and EPA, the CAMU amendments rule promulgated an authorization procedure called interim authorization-by-rule. The rule also granted interim authorization for those amendments to states that have final authorization for the 1993 CAMU rule and submitted a letter to EPA that they are willing and able to implement the amended CAMU regulations by March 22, 2002 (see 40 CFR 271.27(a)).

A total of 25 states authorized for the 1993 CAMU rule, submitted the notification letter to EPA by March 22, 2002 and met the criteria for interim authorization-by-rule. These states are: Alabama, California, Delaware, Florida, Georgia, Illinois, Indiana, Louisiana, Missouri, Nevada, New Mexico, New York, North Carolina, North Dakota, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Washington, Wisconsin, and Wyoming. Thus, these states have interim authorization for the CAMU amendments rule, effective April 22, 2002.

Public Law 107-69 (November 12, 2001), an Act to Amend the Reclamation Recreation Management Act of 1992 (the Act) provides for law enforcement authority at Reclamation facilities. Section 1(g) provides: “REGULATIONS—Except for the authority provided in section 2(c)(1), the law enforcement authorities provided for in this section may be exercised only pursuant to regulations issued by the Secretary of the Interior and approved by the Attorney General.” As enacted, however, the Act does not contain a section 2(c)(1), as referred to in section 1(g), but does contain a section 1(c)(1), which “authorize[s] law enforcement personnel from the Department of the Interior to act as law enforcement officers to enforce Federal laws and regulations within a Reclamation project or on Reclamation lands.” The Department worked closely with the Congress to develop the language in this bill and believes that the congressional intent of section 1(g) was to refer to section 1(c)(1). Reclamation is promulgating these regulations consistent with that interpretation. The Act provides for law enforcement at Reclamation facilities in one of two ways: using Department law enforcement personnel (this would not require us to issue regulations or obtain Department of Justice approval); or, using law enforcement personnel from non-Department Federal agencies (other than the Department of Defense) and State, local or tribal law enforcement organizations (this would require us to issue regulations that the Department of Justice must approve). These regulations have been reviewed and approved by the Department of Justice, as required by the Act.

Since Reclamation plans to use some non-Department law enforcement officials, these regulations provide fitness and training requirements for non-Department law enforcement personnel. Under these regulations, Reclamation will:

(1) Entrust law enforcement authority only to law enforcement professionals possessing adequate education and/or experience, aptitude, and high moral character;

(2) Evaluate law enforcement programs and operations to ensure compliance with applicable Federal laws and regulations; and

(3) Ensure that qualitative standards are attained and maintained during the life of any cooperative agreements or contracts with other Federal agencies or with State, local, or tribal law enforcement organizations.

Reclamation did not publish a notice of proposed rulemaking (NPRM) for this regulation. In keeping with 5 U.S.C. 553(b), Reclamation finds that good cause exists for not publishing an NPRM. The time-frame for the NPRM process, which would result in delaying the effective date of this rule, is contrary to the public interest because it may render individuals and facilities vulnerable to subversive activity, sabotage, or terrorist attack. Moreover, with the coming of Spring and planned events for Reclamation's upcoming Centennial, more people will be visiting Reclamation's many recreation areas. The measures in this rule are intended to address a potential terrorist attack as well as other criminal activities against Reclamation lands, dams and powerplants and related facilities or against individuals at those places. Immediate action is required to accomplish these objectives, and any delay in the effective date of this rule is impracticable and contrary to the public interest. For these same reasons, we find that good cause exists under 5 U.S.C. 553 (d)(3) for making this regulation effective less than 30 days after publication in the Federal Register .

On September 11, 2001, immediately following the terrorist attacks on the World Trade Center and the Pentagon, security at all Reclamation dams and powerplants was heightened, and armed law enforcement officers from Department agencies began around-the-clock patrols at key facilities. National security officials warn that future terrorist attacks against high visibility civilian targets may be anticipated, and all Reclamation facilities will remain on a heightened security status indefinitely.

Before enactment of Public Law 107-69, Reclamation generally had to rely on law enforcement personnel from other bureaus within the Department of the Interior to protect Reclamation facilities. While other bureaus have been very cooperative in providing law enforcement assistance, the continued need for heightened security at many facilities has strained available Department law enforcement resources. Furthermore, with the coming of Spring, Department law enforcement personnel will have to return to their seasonal duty stations. Accordingly, Reclamation will need to exercise its authority to contract or enter into cooperative agreements for law enforcement services with Department of the Interior bureaus and other Federal, State, tribal or local law enforcement agencies. We need to implement this authority as soon as possible to ensure the safety of the public and Reclamation employees and to protect critical national infrastructure and other critical water and power resource facilities. Reclamation will develop a mandatory orientation session for officers who are to be authorized to perform Reclamation law enforcement duties.

While this rule will be effective on the date published, Reclamation will accept and consider comments on the rule for 60 days after the date of publication. Among the issues on which Reclamation expects comments are the appropriate treatment of non-Department Federal officials under these regulations, the extent to which this framework for State and local law enforcement participation may be consistent with the diverse expectations of local communities across the seventeen Western States, and whether these and other issues should be addressed in regulation or in individual contracts or cooperative agreements.

Reclamation has analyzed this rule in accordance with the criteria of the National Environmental Policy Act and 516 DM. This rule does not constitute a major Federal action significantly affecting the quality of the human environment. An environmental assessment is not required. The rule is categorically excluded from NEPA review under 40 CFR 1508.4, 516 DM 2, Appendix 1, § 1.10.

This document is not a significant rule, and the Office of Management and Budget has not reviewed this rule under Executive Order 12866.

(1) This rule will not have an effect of $100 million or more on the economy or adversely affect the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities. While risk assessments at many critical facilities are not yet completed and thus total law enforcement contractual needs cannot be fully determined, it is estimated that the total start-up cost for implementing Public Law 107-69 will be in the range of $50—55 million in the first year. This estimate is based on contracting for around-the-clock law enforcement services at up to 60 critical facilities.

(2) This rule will not create a serious inconsistency or otherwise interfere with an action taken or planned by another agency. The selection process for law enforcement personnel will be consistent with that used by the Department, thereby assuring that high professional law enforcement standards are maintained.

(3) This rule will not alter the budgetary effects or entitlements, grants, user fees, or loan programs or the rights or obligations of their recipients. This rule provides the legal authority to continue to safely provide services to project beneficiaries without the threat of terrorism and to protect their contractual rights and entitlements under Federal reclamation laws.

(4) This rule does not raise novel legal or policy issues. It is Reclamation's intent to utilize the established policies and guidelines on law enforcement being used in the Department.

The Department of the Interior certifies that this document will not have a significant economic effect on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq ). A Regulatory Flexibility Analysis is not required. Accordingly, a Small Entity Compliance Guide is not required.

This rule is not a major rule under 5 U.S.C. 804(2), the Small Business Regulatory Fairness Act. The rule:

(1) Will not have an annual effect on the economy of $100 million or more. A farm, according to the Small Business Administration (SBA), is a small business if it has annual receipts of less than $500,000. The vast majority of the 140,000 farms receiving Reclamation project irrigation water can be classified as “small businesses'' under the SBA definition. This rule will help maintain water deliveries to those farms.

(2) Will not cause a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions. The rule will have a negligible impact on local and regional costs or prices, but the presence of law enforcement officers and the enhanced security measures at key Reclamation projects may in fact help to stabilize the existing economic conditions located in the project area.

(3) Will not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.-based enterprises to compete with foreign-based enterprises. In fact, the rule may create additional employment opportunities for local residents in Reclamation project areas. No effects are anticipated on local competition and/or investment opportunities as a result of this rule.

This rule does not impose an unfunded mandate on State, local, or tribal governments or the private sector of more than $100 million per year. Moreover, the rule does not have a significant or unique effect on State, local, or tribal governments or the private sector. A statement containing the information required by the Unfunded Mandates Reform Act (2 U.S.C. 1531 et seq ) is not required.

In accordance with Executive Order 12630, the rule does not have significant takings implications. Thus, a takings implication assessment is not required, nor will the rule have any effect on the use and/or value of private property.

This rule does not require any information collection under the Paperwork Reduction Act. Therefore, an OMB Form 83-I is not required.

In accordance with Executive Order 13132, this rule does not have Federalism implications. A Federalism assessment is not required. The rule will not affect the roles, rights, and responsibilities of States in any way. Moreover, the rule will not result in the Federal Government taking control of traditional State responsibilities, nor will it interfere with the ability of States to formulate their own policies. In addition, the rule will not affect the distribution of power, the responsibilities among the various levels of government, nor preempt State law.

In accordance with Executive Order 12988, the Department's Office of the Solicitor has determined that this rule does not unduly burden the judicial system and meets the requirements of section 3(a) and 3(b)(2) of the Executive Order.

In accordance with Executive Order 13211, the rule will not have a significant adverse effect on the supply, distribution, and use of energy. Therefore, a Statement of Energy Effects is not required.

If you wish to comment on this rule, you may submit your comments by one of two methods. You may mail comments to: Bureau of Reclamation, 1849 C Street NW., Washington, DC 20240, Attn: Henk Willems. You may also hand-deliver comments to the Bureau of Reclamation, Room 7610, Main Interior Building, 1849 C Street NW., Washington, DC 20240. Our practice is to make comments, including names and home addresses of respondents, available for public review during regular business hours. Individual respondents may request that we withhold their home address from the rulemaking record. We will honor the request to the extent allowable by law. There also may be circumstances in which we would withhold from the rulemaking record a respondent's identity, as allowable by law. If you wish us to withhold your name and/or address, you must state this prominently at the beginning of your comment. However, we will not consider anonymous comments. We will make all submissions from organizations or businesses, and from individuals identifying themselves as representatives or officials of organizations or businesses, available for public inspection in their entirety.

This is a synopsis of the Order (“ Order ”) in MM Docket No. 02-113, FCC 02-150, adopted May 16, 2002, and released May 24, 2002. The complete text of this Order is available for inspection and copying during normal business hours in the FCC Reference Center, Room CY-A257, 445 12th Street, SW., Washington, DC and may also be purchased from the Commission's copy contractor, Qualex International, Portals II, 445 12th Street SW, CY-B402, Washington, DC 20554. The Order is also available on the Internet at the Commission's website: http://www.fcc.gov.

1. The Commission has adopted an Order modifying its rules to permit the Media Bureau delegated authority to deny digital television construction deadline extension requests.

2. Pursuant to the authority contained in sections 1, 2(a), 4(i), 303, 307, 309, and 310 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 152(a), 154(i), 303, 307, 309, and 310, and Section 202(h) of the Telecommunications Act of 1996, this Order is adopted.

On February 27, 2001, NHTSA issued a final rule establishing a limited exemption from a statutory prohibition against specified types of commercial entities from either removing safety equipment or features installed on motor vehicles pursuant to the Federal motor vehicle safety standards (FMVSS) or altering the equipment or features so as to adversely affect their performance. (66 FR 12638, Docket No. NHTSA-01-8667). The exemption allows repair businesses to alter or remove certain types of Federally-required safety equipment and features when they modify passenger motor vehicles for use by persons with disabilities. NHTSA established this exemption for the reasons explained below.

Federal law requires vehicle manufacturers to certify that their vehicles comply with all applicable Federal Motor Vehicle Safety Standards (FMVSSs). (49 U.S.C. 30112). Vehicles must continue to comply until the first retail sale. Federal law also prohibits manufacturers, distributors, dealers, and repair businesses from knowingly making inoperative any part of a device or element of design installed in or on a motor vehicle in compliance with an applicable FMVSS. (49 U.S.C. 30122). NHTSA has interpreted the term “make inoperative” to mean any action that removes or disables safety equipment or features installed to comply with an applicable FMVSS, or that degrades the performance of such equipment or features. Violations of this provision are punishable by civil penalties of up to $5,000 per violation.

Individuals with disabilities often are unable to drive or ride in a passenger motor vehicle unless it has been specially modified to accommodate their particular disability. Some modifications, such as the installation of mechanical hand controls or a left foot accelerator, are relatively simple. Others, such as the installation of a joystick that controls steering, acceleration, and braking, can be complex. In some cases, it is necessary to alter or even remove Federally-required safety equipment to make those modifications. However, if a manufacturer, distributor, dealer, or repair business performed these modifications, they would violate the make inoperative provision. 1

NHTSA has the authority to issue regulations that exempt regulated entities from the make inoperative provision. (49 U.S.C. 30122(c)(1)). Such regulations may specify which equipment and features may be made inoperative, as well as the circumstances under which they may be made so. Before the February 27, 2001 final rule, NHTSA had issued only one such regulation. 2 In all other instances, the agency had addressed the need to remove, disconnect, or otherwise alter mandatory safety equipment by issuing a separate letter to each individual requestor assuring that the agency would not seek enforcement action against the business modifying the vehicle. The vast majority of those instances involved persons seeking modifications to accommodate persons with disabilities.

NHTSA believed that the policy of handling requests for permission to make modifications on an individual, case-by-case basis did not serve the best interests of the driving public, vehicle modifiers, or the agency. NHTSA estimated that close to 2,300 vehicles are modified for persons with disabilities each year, and that this number would increase as the population aged and greater numbers of persons with disabilities pursued employment, travel, and recreational opportunities presented by the passage of the Americans With Disabilities Act (ADA). 3

NHTSA noted that agency resources for evaluating individual modification requests are limited. Thus, a person with a disability could wait a significant period of time before the agency issued a letter stating its intent not to enforce the make inoperative provision for the vehicle modifications affected. Moreover, the unwieldiness of the case-by-case approach caused many vehicle modifiers to bypass it. Consequently, as the agency noted, only a handful of the vehicles modified annually are covered by a letter from NHTSA granting permission to make federally-required safety equipment inoperative. Most are made without the benefit of any guidance about the opportunities for making modifications without sacrificing safety.

As a result, NHTSA decided to replace the case-by-case approach with a rule exempting certain vehicle modifications from the make inoperative provision. The exemptions are listed in 49 CFR part 595, subpart C.

NHTSA received petitions for reconsideration of the final rule from the Association for Driver Rehabilitation Specialists (ADED) and Louisiana Tech University.

In the final rule, the agency noted that a trained professional often evaluates the driving capabilities of a person with a disability and then writes a prescription detailing needed vehicle modifications. NHTSA considered requiring

NHTSA reviewed the comments and decided not to require such prescriptions as a condition of the exemption, stating:

Both ADED and Louisiana Tech requested that the agency reconsider its decision not to require prescriptions as a condition of the exemption. Louisiana Tech claimed that prescriptions are necessary for several reasons. First, prescriptions should be issued by “certified driver rehabilitation specialists” who are trained in both occupational therapy and traffic safety and are certified by the ADED. Second, while some adaptive equipment may be simple to install, there are many variables that affect an individual's ability to operate the equipment. 4 Louisiana Tech stated, “To view the provision of these devices only from the view of the physical functioning necessary for operation is short sighted and compromises the individual's and the public safety.” Third, according to Louisiana Tech, allowing the disabled person or an equipment dealer to determine the types of modifications that are appropriate is a dangerous practice. Fourth, Louisiana Tech stated that the process is not necessarily expensive or time-consuming, since many individuals need relatively simple adaptive equipment and there are third party funding sources available.

Both ADED and Louisiana Tech also requested that NHTSA require prescriptions for vehicle modifications be written by a “certified driver rehabilitation specialist, or equivalent.” The petitioners claimed that the training undergone by certified driver rehabilitation specialists is essential for conducting the clinical aspects of a driver assessment and determining a driver's potential for operating a motor vehicle safely.

NHTSA understands the petitioners' concerns. However, NHTSA does not have the authority to require individuals with disabilities to obtain prescriptions before they have their vehicles modified. The agency does have the authority to condition a repair business's eligibility under the limited exemption to modify a vehicle upon its receipt and keeping on file of a prescription for the modifications to that vehicle. However, NHTSA decided not to exercise this authority for the reasons explained below.

NHTSA does not have the qualifications, nor the authority, to judge who is qualified to conduct a driver evaluation and if there are circumstances under which no evaluation is needed. The basis for our considering a requirement for modifiers to collect prescriptions from clients before making modifications was to ensure that Federal motor vehicle safety standards would not be circumvented unnecessarily.

The petitioners, on the other hand, want to ensure that drivers have the advantage of a physical and cognitive assessment before vehicle modifications are made so that the equipment is correct for their abilities and safe for them to operate. They are also concerned that only safe, able drivers are permitted to drive. NHTSA agrees that the petitioners' goals are laudable. However, those goals are beyond this agency's authority to regulate. Vehicle inspection and driver evaluation, training, and licensing are the regulatory purview of the States.

While NHTSA can place conditions on exemptions from the make inoperative prohibition, the agency cannot directly require drivers to obtain prescriptions in order to ensure that unsafe drivers do not receive vehicle modifications and are therefore prevented from driving, or to ensure that drivers receive only modifications they are capable of using. Such actions are the responsibility of the individual States, because they regulate vehicle registration and driver licensing. NHTSA regulates motor vehicle manufacture and modification. In fact, NHTSA's authority over the modification of vehicles after the first retail sale is limited to those modifications, made by entities for hire, that affect the vehicle's certification to the Federal motor vehicle safety standards.

NHTSA decided not to adopt a requirement under which modifiers would have to obtain prescriptions prior to making vehicle modifications and to keep those prescriptions on file with records of the modifications made because the agency concluded that such a requirement would be an unnecessary and time-consuming burden on the modifier and the consumer. NHTSA did not conclude that driver evaluations for modifications are unnecessary. NHTSA believes that driver evaluations are an essential part in the vehicle modification process. The agency simply concluded that a Federal requirement for vehicle modifiers to obtain and keep records of prescriptions for vehicle modifications is unnecessary. The agency believes that requiring prescriptions for vehicle modification is within the regulatory purview of the individual States, and encourages the States to promulgate regulations addressing this issue.

NHTSA also concluded that the agency is not in a position to determine who is qualified to write prescriptions for vehicle modifications. The petitioners requested that NHTSA change the final rule to require that a prescription be written by a “certified driver rehabilitation specialist or equivalent.” A certified driver rehabilitation specialist (CDRS) is a person who has fulfilled the requirements for that title as administered by the Association for Driver Rehabilitation Specialists. The agency believes that currently there are fewer than 300 CDRSs in the Unites States, and there may be several States in which no CDRS practices.

In addition, the agency cannot realistically determine whether a person has skills “equivalent” to a CDRS. The agency would have to review the credentials of each person making evaluations and determine if he or she were qualified to do so. Such an action is tantamount to licensing individuals to practice driver evaluation. NHTSA believes that the agency has neither the authority nor the qualifications to make such determinations.

Accordingly, the agency is denying the petitioners' request for a Federal requirement that would make it necessary for individuals to obtain prescriptions for vehicle modifications and provide them to vehicle modifiers. Since NHTSA is denying the petitioners' request to require prescriptions, the petitioners' request that prescriptions be written only by a certified driver rehabilitation specialist is moot.

Both ADED and Louisiana Tech expressed concerns about the language that the agency used in the section of the preamble explaining the agency's decision not to require prescriptions. The specific language they objected to is detailed below. The petitioners requested that the agency remove these statements from the preamble to the final rule.

At 66 FR 12652, the agency summarized the comments of those opposed to mandatory prescriptions. These commentors said that requiring prescriptions would unnecessarily increase the burden on the disabled community, increasing costs and limiting access to needed vehicle modifications (particularly in rural areas). Also at 66 FR 12652, the agency stated, “[G]iven the current practice in the industry not to require or rely on prescriptions for relatively simple and inexpensive modifications, we see no need to add an additional burden to an already time-consuming and expensive process.”

ADED called these statements “erroneous and irresponsible.” The petitioner stated that this language “is in direct conflict with the Rehab Act, which requires states to not limit access or delay services to their consumers.” (Emphasis in original). ADED claimed that Vocational Rehabilitation coordinators are already viewing this language as detrimental to the driver evaluation process. ADED added that there are inadequate data to suggest that the evaluation process constitutes a delay to consumers.

Louisiana Tech also objected to the second statement. The petitioner claimed that the evaluation process is not necessarily time-consuming or expensive since many individuals have relatively simple adaptive needs, and there are third party funding sources available to offset the cost of evaluations.

At 66 FR 12652, the agency referred to a comment made by the American Occupational Therapy Association:

Both ADED and Louisiana Tech objected to this statement. Louisiana Tech stated that neither occupational therapists nor traffic safety professionals are adequately trained to perform driver assessments. ADED claimed that occupational therapists are not trained in adaptive driving technology application or on-road assessment, which are necessary to perform driver evaluations.

At 66 FR 12652, the agency referred to comments made by Access Wheels, a vehicle modifier:

ADED objected to the first sentence. The petitioner stated, “Prescriptions are commonplace in the field of modifications and driver rehabilitation” and are used for both simple and complex drier adaptations.

Both petitioners objected to the second sentence. Louisiana Tech claimed, “While there may be some adaptive equipment that appears to be ‘simple’ to operate, there are many variables that go into an individual's ability to either operate that equipment, perform the driving task or both.” ADED stated, “Some of the most difficult evaluations involve simple equipment, because issues revolve around the driver candidate's performance and skill set to use even simple devices.”

Finally, ADED stated that the section of the preamble discussing prescriptions “appears to recommend that prescriptions are not only not required, but unnecessary.” ADED noted that this conflicts with a brochure written jointly by ADED, NHTSA, and the National Mobility Equipment Dealers Association (NMEDA) entitled “Adapting Motor Vehicles for People With Disabilities.”  5 ADED stated that the brochure devotes a significant amount of text to the evaluation process.

A final rule, which consists of a preamble and regulatory text, is a historical document that itself cannot be changed. However, the regulatory text in a final rule can be amended in a subsequent final rule. Further, any misstatements and errors in the preamble of a final rule can be corrected in a subsequent notice.

NHTSA notes that several of the statements to which the petitioners objected are not statements made by the agency, but statements in the comments of various respondents on the proposed rule. The agency is required to consider all comments, whether they represent the same or divergent points of view. To that end, in the final rule preamble, the agency summarized the comments of proponents and opponents of conditioning the exemption upon the obtaining of prescriptions. The agency specifically and correctly attributed those comments to the individuals or groups who made them.

As to the statements made by NHTSA in the preamble to the final rule, the agency believes that the petitioners have misunderstood the agency's position on driver evaluation prior to the modification of a vehicle. NHTSA does believe that driver evaluation is a very important element to a successful vehicle modification for persons with disabilities, and that evaluations should be performed whenever possible. However, the agency believes that requiring persons with disabilities to obtain prescriptions before having their vehicle modified is within the regulatory purview of the States, which regulate driver evaluation, training, and licensing, and vehicle inspection. The agency does not wish to establish such a requirement indirectly by conditioning a vehicle modifier's ability to take advantage of the limited exemption upon the modifier's obtaining a prescription from the person requesting the modifications. The agency also believes it is not qualified to judge who should conduct a driver evaluation and whether there are circumstances under which no evaluation is needed.

Finally, NHTSA addressed above the following statement made by the agency in the final rule preamble: “[G]iven the current practice in the industry not to require or rely on prescriptions for relatively simple and inexpensive modifications, we see no need to add an additional burden to an already time-consuming and expensive process.” As noted above, the agency did not conclude that prescriptions for modifications are not beneficial. The agency believes that driver evaluations are an essential part in the vehicle modification process. The agency simply concluded that, for NHTSA's purposes, a new Federal requirement for vehicle modifiers to obtain such prescriptions from persons seeking modifications and keep records of them would be an unnecessary and time consuming burden on the modifier and the consumer.

For these reasons, the agency cannot remove these statements from the preamble of the final rule and is denying the petitioners' request to do so.

For the reasons stated above, the agency is denying the petitions for reconsideration.